H. Remedies for Repudiatory Breach

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 641-646

Contenidos

• 1) The Right to Disaffirm.
• 2) Damages.
• 3) Restitution.

Page 641

In the context of a repudiatory breach, the party not at fault has available a variety of remedial options both at common law and in equity. The possible availability of the equitable remedies of specific performance and injunctions will not be considered here.⁵⁷Our focus at this point is on the ability to treat the contract as at an end and the availability of the common law remedies of damages and restitution. At common law, the party not at fault confronted by a repudiatory breach may exercise a right to terminate or disaffirm the contract and suspend further performance. Further, whether that party decides to affirm or disaffirm the contract, a claim for damages for breach of contract may be pursued in either event.⁵⁸In certain circumstances, the party not at fault may be able to pursue, as an alternative to the claim for damages, a claim in restitution for the value of benefits conferred on the party in default.⁵⁹Each of these options is considered briefly below.

1) The Right to Disaffirm

A repudiatory breach does not, in itself, bring an end to a contract. Rather, it confers upon the innocent party a right of election to treat the contract at an end, thereby relieving the parties of further performance though not, of course, relieving the party guilty of repudiatory breach from its liabilities for contractual breach.

As a general rule, the party not at fault must make the election and communicate it to the repudiating party. As Asquith L.J. stated in Howard v. Pickford Tool Co. Ltd.,⁶⁰ "An unaccepted repudiation is a thing writ in water and of no value to anybody; it affords no legal rights of any sort or kind."⁶¹Thus, failure to communicate a decision to terminate may, in appropriate circumstances, have the effect of affirming the contract. The

Page 642

employee in Pickford Tool was denied a declaration that the employer’s repudiatory breach had discharged the agreement as he had continued on with his employment for some months. On the other hand, the election to disaffirm can be communicated by conduct and, in an appropriate case, mere silence or inactivity may be a sufficient signal of an election. In Vitol S.A. v. Norelf Ltd.⁶² the buyer wrongfully repudiated a contract for the sale of goods. The seller failed to take any of the normal steps, such as the tendering of shipping documents, to perform the agreement. This was held to be sufficient evidence of an election to disaffirm.

The party terminating for repudiatory breach is not under an obligation to communicate the reason for termination to the party in breach.⁶³The terminating party may nonetheless rely on the breach that occurred if later called upon to justify the termination. Indeed, it is accepted that even if an incorrect reason for termination is specified at the time of communicating the decision to terminate, the innocent party may later rely on an actual repudiatory breach of the party in breach, even one of which the terminating party was unaware at the time of the decision to terminate, as a later justification for termination.⁶⁴A recent illustration is provided by Glencore Grain Rotterdam BV v.Lebanese Organisation for International Commerce.⁶⁵ In the context of a contract to buy a large quantity of wheat f.o.b. a vessel to be supplied by the buyer, the seller purported to terminate the contract when the buyer’s vessel arrived one day late. Although the late arrival was held not to constitute a valid reason for termination, the seller was able to subsequently justify the termination on the basis of the buyer’s failure to have submitted a conforming letter of credit. Although the seller had protested the terms of the letter of credit at the time of its presentation, a conforming letter of credit had not been supplied by the buyer in a timely fashion. The seller first relied on the non-conforming letter as a basis for termination, however, during the ensuing litigation. Nonetheless, the court applied the basic principle that a party who is entitled to terminate for repudiatory breach is not deprived of the right to do so by giving an incorrect reason for...