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Election

Repudiation of Contract

Repudiation of Contract. Option to Disregard

Rescission

Speaking Silence


Law and Sea. Repudiatory Breach

Apart from actual breach the English law recognises also an anticipatory breach in instances when the time for performance has not yet arrived but one of the parties to contract by words or conduct evinces an intention no longer to be bound by the term of it. The innocent party may then elect to treat such declaration or conduct as a breach going to the root of the matter and to consider himself discharged from further performance.
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Anticipatory Breach

The seeds of the later doctrine of accepted anticipatory breach can be found in Jones v Barkley (1781) 2 Doug. 684 where Lord Mansfield said, at p. 694:

One need only state what the agreement, tender, and discharge were, as set forth in the declaration. It charges, that the plaintiffs offered to assign, and to execute and deliver a general release, and tendered a draft of an assignment and release, and offered to execute and deliver such assignment, but the defendant absolutely discharged them from executing the same, or any assignment and release whatsoever. The defendant pleads, that the plaintiff did not actually execute an assignment and release; and the question is, whether there was a sufficient performance. Take it on the reason of the thing. The party must shew he was ready; but, if the other stops him on the ground of an intention not to perform his part, it is not necessary for the first to go farther, and do a nugatory act.

Hochster v de la Tour (1853) 2 E. & B. 678 where Lord Campbell, CJ said, at pp. 693-694:

If it should be held that, upon a contract to do an act on a future day, a renunciation of the contract by one party dispenses with a condition to be performed in the meantime by the other, there seems no reason for requiring that other to wait until the day arrives before seeking his remedy by action: and the only ground on which the condition can be dispensed with seems to be, that the renunciation may be treated as a breach of the contract.

In Johnstone v Milling (1886) 16 Q.B.D. 460 Lord Esher, M.R. described the situation when one party wrongly refuses to perform obligations thus, at p. 467:

A renunciation of a contract, or in other words, a total refusal to perform it by one party before the time for performance arrives, does not, by itself, amount to a breach of contract but may be so acted upon and adopted by the other party as a rescission of a contract as to give an immediate right of action. When one party assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned declares his intention then and there to rescind the contract … The other party may adopt such renunciations of the contract by so acting upon it as in effect to declare that he too treats the contract as at an end, except for the purpose of bringing an action upon it for the damages sustained by him in consequence of such renunciation.

Frost v Knight (1872) LR 7 Ex 111 per Cockburn CJ at pp.112-113, 114:

The law with reference to a contract to be performed at a future time, where the party bound to performance announces prior to the time his intention not to perform it, … may be thus stated. The promisee, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-performance: but in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all the obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it. On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it; and in such action he will be entitled to such damages as would have arisen from non-performance of the contract at the appointed time, subject, however, to abatement in respect of any circumstances which may have afforded him the means of mitigating his loss.

It is true … that there can be no actual breach of a contract by reason of non-performance so long as the time for performance has not yet arrived. But, on the other hand, there is—and the decision in Hochster v De la Tour (1853) 2 E & В 678 proceeds on that assumption—a breach of the contract when the promisor repudiates it and declares he will no longer be bound by it. The promisee has an inchoate right to the performance of the bargain, which becomes complete when the time for performance has arrived. In the mean time he has a right to have the contract kept open as a subsisting and effective contract. Its unimpaired and unimpeached efficacy may be essential to his interests. His rights acquired under it may be dealt by him in various ways for his benefit and advantage. Of such advantage the repudiation of the contract by the other party, and the announcement that it never will be fulfilled, must of course deprive him. It is therefore quite right to hold that such an announcement amounts to a violation of the contract in omnibus, and that upon it the promisee, if so minded, may at once treat it as a breach of the entire contract, and bring his action accordingly.

Per Lord Wright in Heyman v Darwins Ltd. [1942] AC 356, at p.379:

But perhaps the commonest application of the word "repudiation" is to what is often called the anticipatory breach of a contract where the party by words or conduct evinces an intention no longer to be bound and the other party accepts the repudiation and rescinds the contract. In such a case, if the repudiation is wrongful and the rescission is rightful, the contract is ended by the rescission but only as far as concerns future performance. It remains alive for the awarding of damages either for previous breaches or for the breach which constitutes the repudiation. That is only a particular form of contract-breaking and would generally under an ordinary arbitration clause involve a dispute under the contract like any other breach of contract. There is no difference, for instance, for this purpose between a refusal to take further instalments under a contract for the sale of goods by instalments and a refusal to take the entire contract quantity where the tender is to be a single delivery. I need scarcely add that one party to a contract cannot put an end to it. To produce that effect there must be rescission. An anticipatory breach does not necessarily involve an actual intention to break the contract. Intention is to be judged by the party’s conduct. The difference between repudiating a contract and repudiating liability under it must not be overlooked. It is thus necessary in every case in which the word repudiation is used to be clear in what sense it is being used.

Universal Cargo Carriers Corpn v Citati [1957] 2 All ER 70, [1957] 2 QB 401, per Devlin J at pp.436-38:

The law on the right to rescind is succinctly stated by Lord Porter in Heyman v. Darwins Ltd. as follows: "The three sets of circumstances giving rise to a discharge of contract are tabulated by Anson as: (1) renunciation by a party of his liabilities under it; (2) impossibility created by his own act; and (3) total or partial failure of performance. In the case of the first two, the renunciation may occur or impossibility be created either before or at the time for performance. In the case of the third, it can occur only at the time or during the course of performance." The third of these is the ordinary case of actual breach, and the first two state the two modes of anticipatory breach. In order, that the arguments which I have heard from either side can be rightly considered, it is necessary that I should develop rather more fully what is meant by each of these two modes.

A renunciation can be made either by words or by conduct, provided it is clearly made. It is often put that the party renunciating must "evince an intention" not to go on with the contract. The intention can be evinced either by words or by conduct. The test of whether an intention is sufficiently evinced by conduct is whether the party renunciating has acted in such a way as to lead a reasonable person to the conclusion that he does not intend to fulfil his part of the contract. This application is fully discussed in Forslind v. Bechely-Crundall and forms the basis for the arbitrator’s findings.

Of the two modes, renunciation has since the decision in Hochster v. De La Tour established itself as the favourite. The disadvantage of the other is that the party who elects to treat impossibility as an anticipatory breach may be running a serious risk. Suppose, for example, that a man promises to marry a woman on a future date, or to execute a lease, or to deliver goods; and that before the day arrives he marries another, or executes the lease in favour of another, or delivers the goods to a third party. The aggrieved party may sue at once. "One reason alleged in support of such an action," Campbell C.J. observed in Hochster v. De la Tour, "is, that the defendant has, before the day, rendered it impossible for him to perform the contract at the day: but this does not necessarily follow; for, prior to the day fixed for doing the act, the first wife may have died, a surrender of the lease executed might be obtained, and the defendant might have repurchased the goods so as to be in a situation to sell and deliver them to the plaintiff." But if the plaintiff treats the defendant’s conduct as amounting to renunciation and justifies his rescission on that ground, the defendant could not avail himself of this defence.

… Since a man must be both ready and willing to perform, a profession by words or conduct of inability is by itself enough to constitute renunciation. But unwillingness and inability are often difficult to disentangle, and it is rarely necessary to make the attempt. Inability often lies at the root of unwillingness to perform. Willingness in this context does not mean cheerfulness; it means simply an intent to perform. To say: "I would like to but I cannot" negatives intent just as much as "I will not." In the earlier part of his argument Mr. Mocatta contended that a statement of inability without unwillingness did not amount to a renunciation, but in the end he abandoned the point. He concedes that the arbitrator’s conclusion that the charterer evinced an intention not to perform is sufficiently supported by the finding that his attitude was that he was willing to perform if he could, but that he could not. In the other form of anticipatory breach, Mr. Mocatta, as will be seen, contends that the disablement must be deliberate and not negligent or accidental. But to the extent that inability enters into renunciation, Mr. Mocatta is not concerned with the character of the inability. If a man says "I cannot perform," he renounces his contract by that statement, and the cause of the inability is immaterial.

… The two forms of anticipatory breach [renunciation by a party of his liabilities under it and impossibility created by his own act] have a common characteristic that is essential to the concept, namely, that the injured party is allowed to anticipate an inevitable breach. If a man renounces his right to perform and is held to his renunciation, the breach will be legally inevitable; if a man puts it out of his power to perform, the breach will be inevitable in fact - or practically inevitable, for the law never requires absolute certainty and does not take account of bare possibilities. So anticipatory breach means simply that a party is in breach from the moment that his actual breach becomes inevitable. Since the reason for the rule is that a party is allowed to anticipate an inevitable event and is not obliged to wait till it happens, it must follow that the breach which he anticipates is of just the same character as the breach which would actually have occurred if he had waited.

Per Lord Steyn in Vitol S.A. v Norelf Ltd. (The Santa Clara), [1996] Vol. 2 Lloyd’s Rep. 225 at p. 229:

My Lords, the question of law before the House does not call for yet another general re-examination of the principles governing an anticipatory breach of a contract and the acceptance of the breach by an aggrieved party. For present purposes I would accept as established law the following propositions: Where a party has repudiated a contract the aggrieved party has an election to accept the repudiation or to affirm the contract: Fercometal S.A.R.L. v Mediterranean Shipping Co. S.A. [1988] 2 Lloyd’s Rep. 199; [1989] AC 788.

An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that that aggrieved party is treating the contract as at an end.

… the aggrieved party need not personally, or by an agent, notify the repudiating party of his election to treat the contract as at an end. It is sufficient that the fact of the election comes to the repudiating party’s attention, e.g. notification by an unauthorized broker or other intermediary may be sufficient: Wood Factory Pty. Ltd. v Kiritos Pty. Ltd. [1985] 2 N.S.W.L.R. 105 at p. 146, per Mr. Justice McHugh; Majik Markets Pty. Ltd. v S. " M. Motor Repairs Pty. Ltd. (No. 1), (1987) 10 N.S.W.L.R. 49 at p. 54, per Mr. Justice Young; Carter and Harland, Contract Law in Australia, 3rd ed. (1996) pp. 689-691, par. 1970.


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