ACCA F4 - Corp and Business Law (ENG)

92 6: Breach of contract and remedies Part B The law of obligations

Where the injured party allows the contract to continue, it may happen that the parties are discharged

from their obligations without liability by some other cause which occurs later.

If the innocent party elects to treat the contract as still in force, the former may continue with their

preparations for performance and recover the agreed price for their services. Any claim for damages will

be assessed on the basis of what the claimant has really lost.

White & Carter (Councils) v McGregor 1961

The facts: The claimants supplied litter bins to local councils, and were paid not by the councils but by

traders who hired advertising space on the bins. The defendant contracted with them for advertising of his

business. He then wrote to cancel the contract but the claimants elected to advertise as agreed, even

though they had at the time of cancellation taken no steps to perform the contract. They performed the

contract and claimed the agreed payment.

Decision: The contract continued in force and they were entitled to recover the agreed price for their

services. Repudiation does not, of itself, bring the contract to an end. It gives the innocent party the choice

of affirmation or rejection.

Questions on breach of contract may focus on specific types of breach and the remedies available.

2.1.3 Termination for repudiatory breach

To terminate for repudiatory breach the innocent party must notify the other of their decision. This may be

by way of refusal to accept defects in performance, refusal to accept further performance, or refusal to

perform their own obligations.

 They are not bound by their future or continuing contractual obligations, and cannot be sued on

them.

 They need not accept nor pay for further performance.

 They can refuse to pay for partial or defective performance already received, unless the contract is

severable.

 They can reclaim money paid to a defaulter if they can and do reject defective performance.

 They are not discharged from the contractual obligations which were due at the time of

termination.

The innocent party can also claim damages from the defaulter. An innocent party who began to perform

their contractual obligations but who was prevented from completing them by the defaulter can claim

reasonable remuneration on a quantum meruit basis.

2.1.4 Affirmation after repudiatory breach

If a person is aware of the other party's repudiatory breach and of their own right to terminate the contract

as a result but still decides to treat the contract as being in existence they are said to have affirmed the

contract. The contract remains fully in force.

Anticipatory breach occurs before the time that performance is due. Repudiatory breach usually occurs at

the time of performance.

3 Damages

Damages are a common law remedy intended to restore the party who has suffered loss to the position

they would have been in if the contract had been performed. The two tests applied to a claim for damages

relate to remoteness of damage and measure of damages.

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