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Anticipatory Breach


Omission to Act

Repudiation of Contract


Rescission and Frustration

Law and Sea.

within main reasons to keep contract alive is substantial difficulties in fair assessment of damages by injured side, especially when some part of loss is hardly recoverable because it is too remote and commitments, which injured party may have with third parties, which he must honour as a matter of business.

Repudiation of Contract. Option to Disregard
Last updated: 28-Nov-2015

The Lord Justice-Clerk (Lord Hope) said in Howie v Anderson (1848) 10 D 355 at p 357:

I do not understand exactly what is meant by the plea that the contract was broken and at an end on Oct. 31, merely because the defender, in pursuance of his scheme of acting wrongfully, gave notice that he would not fulfil the contract ... He had no power to alter the date of the fulfilment of the contract: He had no power to affect the extent of the rights and claims of the pursuer, as on the date when the contract was to be fulfilled. That very intimation was a wrongful act,--the commencement of the wrong which was consummated by the actual failure of delivery on Jan. 8. The bargain continued to subsist as a binding contract to be fulfilled at the proper time by the defender, after his intimation of Oct. 31, exactly as if that intimation had not been made.

From Lord Reid judgement in White & Carter (Councils) Ltd v McGregor [1961] 3 All ER 1178 at pp.1181, 1183:

The general rule cannot be in doubt. It was settled in Scotland at least as early as 1848 and it has been authoritatively stated time and again in both Scotland and England. 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 might be said that, because in most cases the circumstances are such that an innocent party is unable to complete the contract and earn the contract price without the assent or co-operation of the other party, therefore in cases where he can do so he should not be allowed to do so. I can see no justification for that.

The other ground would be that there is some general equitable principle or element of public policy which requires this limitation of the contractual rights of the innocent party. It may well be that, if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself. If a party has no interest to enforce a stipulation he cannot in general enforce it: so it might be said that if a party has no interest to insist on a particular remedy he ought not to be allowed to insist on it. And, just as a party is not allowed to enforce a penalty, so he ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him.

In Isabella Shipowner SA v Shagang Shipping Co Ltd (The Aquafaith) [2012] EWHC 1077 per Cooke J at paras 37 and 47:

Could the owners claim hire from the charterers under this time charter without the need for the charterers to do anything under the charter? The answer is yes. If the charterers failed to give any orders, the vessel would simply stay where it was, awaiting orders but earning hire. Although the master is under the orders of the charterer, the master and crew are the servants of the owners and the ship is available to the charterers for any order they wish to give. Hire continues to be earned. Although the charterers are obliged under the terms of the charter to provide and pay for fuel, should the bunkers run out whilst awaiting orders, it is open to the owners to stem the vessel and to charge that to the charterers' account. In order to complete their side of the bargain, the owners do not need the charterers to do anything in order for them to earn the hire in question. The earning of hire after purported redelivery was not dependent on any performance by the charterers of their obligations.

The owners were therefore at risk of the charterers directing their limited funds to meet obligations to other parties, whilst delaying payment of any sums owing to the owners until the end of the charterparty and the assessment of what was due in damages. Instead of paying hire up front, semi-monthly in advance, with all the cashflow implications of that, the charterers wished to compel the owners to trade the vessel in mitigation of loss and leave themselves liberty to argue about the quantum of damages at the end of the relevant period and pay whatever they could at that stage. The existence of expert reports produced by the parties, as recorded in the Reasons, showed that the views of the parties about the state of the market were not identical, giving rise to the possibility of significant argument as to proper mitigation of loss and the extent of damages recoverable. Should the charterers choose to do so, payment of any liability could be postponed until the conclusion of an arbitration, months away, by which time the charterers could conceivably have become insolvent or arguments used to secure a settlement discount on any loss claimed. The owners wished to guard against that by maintaining the charter with the ability to claim hire and sue/proceed in arbitration for it on any default, without the propensity for argument as to failure to mitigate damages. The arbitrator never appears to have grappled with this point at all.

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