What is Repudiation of a Contract?
Posted by: Tom Wood | Date: 3 October 2012
I have had a number of clients recently approach me in relation to contractual disputes. Often we need to consider whether repudiation has taken place. Repudiation of a contract occurs where one party renounces his or her obligations under a contract.
The principle revolves around the concept that parties should be ready, willing and able to fulfil their contractual obligations at the relevant time.
There are a number of basic principles that apply to repudiation that I have summarised below:
- Repudiation will be established if the conduct of Party A, whether verbal or otherwise, conveyed to Party B demonstrates Party A’s inability to perform the contract, or an intention not to perform its obligations.
- Whether there has been repudiation depends on the objective acts of the parties.
- There will be repudiation if the conduct of Party A was such as to convey to a reasonable person in the position of Party B, repudiation of the contract as a whole, or of a fundamental obligation under it.
- Repudiation may occur at any time between formation of the contract and completion.
- If Party A repudiates a contract or a fundamental obligation under it, Party B has the election to accept the repudiation and bring the contract to an end.
- A clear inability or unwillingness to perform a fundamental obligation at a stipulated essential time by Party A, is an anticipatory breach, entitling Party B to terminate the contract.
- If Party A repudiates and Party B elects not to terminate but to affirm the contract, but thereafter Party A continues to repudiate, Party B may terminate on the basis of the continued repudiation.
- Party B, in order to be entitled to rescind for anticipatory breach, must at the time of Party A’s rescission itself be willing to perform the contract.
It should be noted that the repudiation itself does not bring the contract to an end; the innocent party must accept the repudiation and terminate the contract in order to trigger a right to damages
This is a particularly complex area of law and depends largely on the facts of each matter. It is very important to obtain detailed legal advice before any steps are taken.
Please do not hesitate to contact me for further information.
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