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Lecture notes Contract Law LLB - damages and breach
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-full notes and summary of damages and breach of contract for llb contract law
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Termination of the contract for breach-Two distinct situations in which an innocent party can terminate a contract because of the other
party’s breach. Firstly defective or non-performance (straightforward breach) here whether the
party can terminate the contract and claim damages depends on the classification of the term
that's been breached. Secondly a category generally called ‘repudiation’ of the contract where
one party has pulled out or renounced the contract by words or conduct, in this way you can
repudiate a contract in advance of the fixed time for performance (an ‘anticipatory breach’).
Identifying a breach and the remedies available for breach
-A breach of contract will occur where without lawful excuse (frustration) a party fails or refuses
to perform a performance obligation undertaken as part of the terms of a contract. Or a
defective performance failing to meet the required standard.
-Generally the non-breaching party is entitled to compensation for loss caused by the breach.
The failure to perform the obligation gives rise to a secondary obligation to pay damages or the
contract price (Photo Production Ltd v Securicor Transport Ltd[1980]). This can be limited by
exemption clauses
-This all depends on the nature of the obligation breached and whether one party's performance
obligation is ‘entire; so it must be completely performed before the others obligation arises
Repudiatory breach and the election to terminate or affirm (Introduction)
-If the breach is not a repudiatory one then the contract remains in force and both parties must
perform their obligations.
-A repudiatory breach is normally caused by the breach of a condition or serious breach of an
innominate term, or an anticipatory breach
-A repudiatory breach is one that allows for the contract to be treated as repudiated (not binding
or legally valid) or terminated (for the future) by the non-breaching party. This still means that
the contract survives and can be used for seeking damages or other remedies for the breach
and lack of performance that happened before termination.
-If there is a repudiatory breach then the non-breaching party can treat the contract as
repudiated (terminate it relieving both parties of future obligations) but does not have to, and
can choose to affirm the contract and treat the parties future obligations as still in operation
(Decro-Wall International SA v Practitioners in Marketing Ltd[1971])
-If the contract is affirmed then future obligations are enforceable and any failure by either party
there-on (including the affirming party) to perform their obligation will become a breach (Motor
Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India, The Kanchenjunga[1990])
Electing to treat the repudiatory breach as terminating the contract (in more detail)
-Until the non-breaching party elects to treat the contract as repudiated, it will still stand (Howard
v Pickford Tool Co. Ltd[1951])(Geys v Société Générale[2012] in an employment setting)
-it needs to be accepted by the non-breaching part as a repudiation
-This is the elective theory ^, the automatic theory (that it is terminated immediately) has been
stated in MSC Mediterranean Shipping Co. SA v Cottonex Anstalt[2016] (however it was
distinguished from geys because in MSC there was no choice to affirm as it could not be
performed (frustrating delay))
, -For the non-breaching party to accept the repudiation a clear and unequivocal communication
is needed or an unequivocal overt act which is inconsistent with the subsistence of the contract
(State Trading Corporation of India v M. Golodetz Ltd[1989]). Vitol SA v Norelf Ltd,
-The Santa Clara[1996] states that a failure by the non-breaching party to perform their
obligations can sometimes signify that the contract is at an end (repudiated).
-General inactivity will not suffice as acceptance, not performing a positive obligation can be, but
simply doing nothing where nothing is required is not necessary to spell out acceptance (Dubai
Islamic Bank PJSC v PSI Energy Holding Co. BSC[2013]) (Vitol SA v Beta Renowable Group
SA[2017]).
-Generally seems to be down to the circumstances and facts of the case.
Election to affirm the contract (further detail)
In order for an affirmation to be valid, the non-breaching party must know of the facts giving rise
to its right to accept the repudiatory breach as terminating the contract, and of its right to choose
between affirming the contract and treating the contract as discharged.
Summary of breach and election to terminate or affirm
-A breach of contract is where without lawful excuse (frustration) a party fails or refuses to
perform an obligation or does so defectively
-Defective or non performance - straightforward breach
-Anticipatory breach - Where a contract is renounced or pulled out of by words or conduct
before performance
-A repudiatory breach is one that allows for the contract to be treated as repudiated (not
binding) or terminated (for the future), the contract still exists and can be used to seek damages.
-A repudiatory breach can arise from a breach of a condition, innominate term or an anticipatory
breach
-The non-breaching party can terminate/repudiate the contract or affirm it and treat the future
obligations as still in operation (Decro-Wall International SA v Practitioners in Marketing
Ltd[1971])
-The non-breaching party must accept repudiation with a clear and unequivocal communication
or overt act which is inconsistent with the subsistence of the contract (State Trading Corporation
of India v M. Golodetz Ltd[1989])
Remedial effects (if a contract has been breached)
-termination/repudiation: treating a contract as if it has ended and is no longer in force. Can only
be done if a condition is broken or an innominate term that has had serious consequences
Damages
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