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Repudiation of Contract


Law and Sea.
Option to Refuse to Accept Repudiation

If owners elected to keep the contract alive, they do not need the charterers to do anything in order for them to complete their side of the bargain and thus be able to earn the hire in question.

Last updated: 06-Oct-2014

Per Lord Goff of Chieveley in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga)[1990] 1 Lloyd’s Rep 391:

Election itself is a concept which may be relevant in more than one context. In the present case, we are concerned with an election which may rise in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election. Characteristically, this state of affairs arises where the other party has repudiated the contract or has otherwise committed a breach of the contract which entitles the innocent party to bring it to an end, or has made a tender of performance which does not conform to the terms of the contract. But this is not necessarily so. An analogous situation arises where the innocent party becomes entitled to rescind the contract, ie to wipe it out altogether, for example because the contract has been induced by a misrepresentation; and one or both parties may become entitled to determine a contract in the event of a wholly extraneous event occurring, as under a war clause in a charter-party. Characteristically, the effect of the new situation is that a party becomes entitled to determine or to rescind the contract, or to reject an uncontractual tender of performance; but, in theory at least, a less drastic course of action might become available to him under the terms of the contract. In all cases, he has in the end to make his election, not as a matter of obligation, but in the sense that, if he does not do so, the time may come when the law takes the decision out of his hands, either by holding him to have elected not to exercise the right which has become available to him, or sometimes by holding him to have elected to exercise it.

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