Repudiatory breaches are significant breaches of contract which go to the core of a contract and deprive the innocent party of the benefit that the contract was intended to provide them.
What could be classed as a repudiatory breach?
As above, what would be considered a repudiatory breach is a high standard and varies depending on the particular circumstances of each case. In any circumstance, the innocent party must be deprived of substantially the whole benefit of the agreement.
When assessing whether there has been a repudiatory breach, the Court will take all circumstances into account and will consider things such as:
- How much of the intended benefit the injured party has already received;
- Whether the breach is likely to be repeated;
- Whether the injured party can be adequately compensated by damages; and
- Whether the value of future performance has been fundamentally changed.
Instances, where a repudiatory breach can occur, are:
- Breach of condition – for example, where a contract expressly provides that ‘time is of the essence’ in respect of the performance of an obligation, and the obligation is not performed by the agreed date.
- Anticipatory breach – i.e. a breach which has not yet occurred but is anticipated. For an anticipatory breach to be repudiatory, the non-performance must be inevitable, not merely unlikely.
- Where a party performs the contract in a radically different way from what was agreed. In Al Giorgis Oil Trading Ltd v AG Shipping & Energy Pte Ltd, one party’s continuous late payment converted a contract for payment in advance to one for payment in arrears, which was not agreed and held to be in repudiatory breach of the agreement.
While a repudiatory breach is a common law remedy, it is possible to set out within an agreement what the parties would consider a repudiatory breach in the circumstances of their individual case.
However, if doing this, you should take care not to limit your rights and remedies at common law, as you should already have a clause setting out what would constitute a contractual breach and the contractual remedies for those breaches.
Remedies for repudiatory breach
The remedies for repudiatory breach are not found in a contract as they are common law remedies. The innocent party to a contract where a repudiatory breach has been committed has the following options:
- Terminate the contract and claim damages (this can include loss of bargain damages);
- Treat the contract as continuing and claim damages for the breach; or
- Waive the breach, accept the performance and continue with the contract.
To claim damages, the injured party will have to show that the breach caused a loss and that the loss is not too remote from the breach. Damages for repudiatory breach are intended to put the injured party in the position that they would have been in had the breach not occurred, so can become quite significant.
Risks of terminating for repudiatory breach
While terminating for a repudiatory breach may often be an appealing option, it does not come without risk. Ironically, if the breach is determined not to be repudiatory and a party has terminated for repudiatory breach, they themselves will have committed a repudiatory breach entitling the other party to all of the above remedies.
How can we help
For further information on the subjects discussed in this article or any related topics, please contact a member of our expert Dispute Resolution team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.