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Cutting through the legalese: Repudiation/Repudiatory breach of contract

We know that one of the most common "pet hates" about solicitors, is the tendency of some members of our profession to use acronyms, Latin and far too many legal phrases both when speaking to clients and in writing. Whilst we hope that at BPE we are not guilty of that crime, we recognise that there are certain phrases which crop up that might not be familiar to all our contacts. This time we attempt to de-mystify….

Repudiation/Repudiatory breach of contract

This is a tricky area of contractual dispute as repudiatory breach is, for lawyers, a bit like a dog: we all know what one is but ask 10 different solicitors to describe one and you will get 10 different results. We look for a repudiatory breach as a way to help a client "get out" of contractual obligations. If we can confidently say that a repudiatory breach has been committed by the other side, our client has the option to terminate the contract immediately and sue for damages. As an example, this can give a contractor an escape from a contract where the costs of carrying out the works have increased in a way that is not recoverable under the contract, thus leaving a contractor legally bound to complete works at a loss. If the employer commits a repudiatory breach, the contractor may be able to terminate.

So how do we know when a breach is repudiatory? This all goes back to case law from 1962 and you essentially have to be able to answer "yes" to either of these two questions (not both):

Q1: Does the breach deprive the innocent party of substantially the whole benefit of the contract?

Q2: Does the breach of the contract go to the root of the contract, such that the breach makes further performance of the contract impossible?

So can you give an example? Not really! It all depends on the context. Do remember that certain specific breaches may have specific remedies either under a written contract or by terms implied by the Construction Act (HGCRA as amended) - e.g,. non-payment, failure to give access to the site, failure to comply with site rules. Where a breach can be dealt with by rules set out in the contract, this should be your first port of call.

If the other side is in repudiatory breach do you have to terminate immediately? No - you can "affirm" the contract - i.e., carry on as before. This means that you can see the contract through to the end and still claim damages for the breach at a later date. However, you may then have difficulty in later changing your mind and deciding to "accept" the breach and terminate the contract. It is also worth noting that if you delay terminating the contract, the other side may actually "cure" the breach and then you are back to square one (Ampurius Nu Homes Ltd v Telford Homes (Creekside) Ltd [2013] EWCA Civ 577)

Well that’s as clear as mud! Repudiatory breach is a grey area and even top Judges have to consider this on a case by case basis. The key advice we can give is that if you think there has been a repudiatory breach, or if you are accused of committing one, take legal advice as your next move will be critical.

If you have any questions relating to this article please email:

Anna Wood - anna.wood@bpe.co.uk or call 01242 248215

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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