Related topics

Anticipatory Breach

Breach of contract

Failure of Consideration

Impossibility of Performance

Repudiation of Contract

Speaking Silence

Law and Sea.
Repudiation. Drastic Measure

Decision to terminate contract is wholly in hands of the contracting party, but the right to terminate is only accrued in certain circumstances. Therefore, while each of the parties to contract is free to stop his contractual performance when he considers that happening of certain events gave him a right to do so, such action if later be found by the court as a wrongful termination, may leave him liable for substantial damages.

Last updated: 06-Jul-2015

Per Lord Selborne in Mersey Steel and Iron Co v Naylor Benzon & Co (1884) 9 App Cas 434 at 438 - 439:

You must look at the actual circumstances of the case in order to see whether the one party to the contract is relieved from its future performance by the conduct of the other; you must examine what that conduct is so as to see whether it amounts to a renunciation, to an absolute refusal to perform the contract and whether the other party may accept it as a reason for not performing his part. 

Universal Cargo Carriers Corpn v Citati [1957] 2 All ER 70, [1957] 2 QB 401, [1957] 2 WLR 713, affd CA, [1957] 3 All ER 234, [1958] 2 QB 254, per Devlin J.:

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

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". 

If a man says "I cannot perform", he renounces his contract by that statement, and the cause of the inability is immaterial.

Heyman v Darwins Ltd. [1942] AC 356, per Lord Porter at p.397:

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. Moreover, if the third be partial, the failure must occur in a matter which goes to the root of the contract. All these acts may be compendiously described as repudiation, though that expression is more particularly used of renunciation before the time of performance has arrived.

Donaldson LJ in The Hermosa [1982] 1 Lloyd’s Rep 570 at pp.572-573 gave summary to the case law on renunciation as below:

For present purposes we take from it the following propositions:

(a) Dissolution of a contract upon the basis of renunciation is a drastic conclusion which should only be held to arise in clear cases of a refusal to perform contractual obligations in a respect or respects going to the root of the contract.

(b) The refusal must not only be clear, but must be absolute. Where a party declares his intention to act or refrain from acting in a particular way on the basis of a particular appreciation of his obligations, either as a matter of fact or of law, the declaration gives rise to a right of dissolution only if in all the circumstances it is clear that it is not conditional upon his present appreciation of his obligations proving correct when the time for performance arrives.

(c) What does or does not amount to a sufficient refusal is to be judged in the light of whether a reasonable person in the position of the party claiming to be freed from the contract would regard the refusal as being clear and absolute?

One further proposition must be added, although it is not gleaned from or confirmed by the decision in Woodar’s case, namely, that (d) the conduct relied upon is to be considered as at the time when it is treated as terminating the contract, in the light of the then existing circumstances. These circumstances will include the history of the transaction or relationship. Later events are irrelevant, save to the extent that they may point to matters which the parties should have considered as hypothetical possibilities at the relevant time.

Per Flaux J in SK Shipping (S) Pte Ltd v Petroexport Ltd [2009] EWHC 2974 (Comm):

86. The critical question is thus whether, by its words or conduct, a party has evinced an intention not to perform the contract, which a reasonable person in the position of the other, innocent, party would regard as clear and absolute. As that last proposition in The Hermosa [1982] 1 Lloyd’s Rep 570, demonstrates, that question is to be judged at the time of termination of the contract, having regard to all the circumstances, including the history of the contractual relationship.

88. The court has to look at the totality of the relevant words and conduct relied upon, in the light of all the circumstances, including the history of the contractual relationship, to determine whether at the time that the claimant purports to accept the words and conduct as renunciatory, the defendant has evinced an intention not to perform, as at that time. Furthermore, particular words or conduct taken in isolation may appear equivocal, but taken with other words and conduct may become unequivocal in terms of amounting to a renunciation. That proposition is of some application in the present case, as will appear. 

96. It seems to me that there is an analogy to be drawn between renunciation and (non-fraudulent) misrepresentation. Just as a claimant must show both actual reliance on or inducement by a misrepresentation as well as that such reliance or inducement was objectively reasonable, so it seems to me a claimant who contends that the defendant has renounced the contract should have to show not only that the words or conduct were objectively evincing an intention not to perform but that the claimant subjectively believed that to be the case. The passages from Viscount Finlay and Lord Shaw in Forslind v Bechely-Crundell 1922 SC (HL) 173 and Lord Herschell’s speech in Carswell v Collard (1893) 20 R (HL) 47 seem to me to support the analogy.

Leave your comments

Form by