ACCA F4 - Corp and Business Law (ENG)

Part B The law of obligations  6: Breach of contract and remedies 91

2.1 Repudiatory breach

Breach of a condition in a contract or other repudiatory breach allows the injured party to terminate the

contract unless the injured party elects to treat the contract as continuing and merely claim damages for

their loss.

A repudiatory breach occurs where a party indicates, either by words or by conduct, that they do not

intend to honour their contractual obligations or commits a breach of condition or commits a breach

which has very serious consequences for the injured party. It usually occurs when performance is due.

It does not automatically discharge the contract – indeed the injured party has a choice.

 They can elect to treat the contract as repudiated by the other, recover damages and treat

themselves as being discharged from their primary obligations under the contract.

 They can elect to affirm the contract.

2.1.1 Types of repudiatory breach

Repudiatory breach arises in the following circumstances.

(a) Refusal to perform (renunciation). One party renounces their contractual obligations by showing

that they have no intention to perform them.

(b) Failure to perform an entire obligation. An entire obligation is said to be one where complete and

precise performance of it is a precondition of the other party's performance.

(c) Incapacitation. Where a party prevents themselves from performing their contractual obligations

they are treated as if they refused to perform them. For instance, where A sells a thing to C even

though they promised to sell it to B, they are in repudiatory breach of their contract with B.

(d) Breach of condition (a fundamental term of the contract).

(e) Breach of an innominate term (a term of the contract, the effect of which cannot be determined

until the contract is breached) which has the effect of depriving the injured party of substantially

the whole benefit of the contract.

2.1.2 Anticipatory breach

If there is anticipatory breach (one party declares in advance that they will not perform their side of the

bargain when the time for performance arrives) the other party may treat the contract as discharged

forthwith, or continue with their obligations until actual breach occurs. Their claim for damages will then

depend upon what they have actually lost.

Repudiation may be explicit or implicit. A party may break a condition of the contract merely by declaring

in advance that they will not perform it, or by some other action which makes future performance

impossible. The other party may treat this as anticipatory breach

 Treat the contract as discharged forthwith

 At their option may allow the contract to continue until there is an actual breach

Hochster v De La Tour 1853

The facts: The defendant engaged the claimant as a courier to accompany him on a European tour

commencing on 1 June. On 11 May he wrote to the claimant to say that he no longer required his

services. On 22 May the claimant commenced legal proceedings for anticipatory breach of contract. The

defendant objected that there was no actionable breach until 1 June.

Decision: The claimant was entitled to sue as soon as the anticipatory breach occurred on 11 May.

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