7.01  We have seen how in The Hongkong Fir Sellers LJ spoke in terms of the charterer being entitled to terminate the engagement if the delay in remedying any breach was so long in fact, or likely to be so long in reasonable anticipation, that the commercial purpose of the contract would be frustrated.¹ In some cases it will be possible to say that a breach is serious enough to justify termination on this ground purely on the basis of its effect in the past, and these have been dealt with in the previous chapter. In others, however, it will also be necessary to take into account its likely effects in the future, and where this is so we have a case of repudiation. And where this occurs before the time of performance has arrived, we have a case of ‘anticipatory’ breach.

7.02  The essence of repudiation, according to Carter, is the absence of readiness and willingness by the defaulting party to perform his or her obligations under the contract.² This is a useful and a helpful definition to bear in mind. The word ‘repudiation’ is an (p. 187) ambiguous one,³ and is used in a variety of senses.⁴ In particular, it is sometimes used to denote fundamental breach generally, as in the case of the term ‘repudiatory breach’,⁵ and is sometimes even used in connection with breaches of condition.⁶ However, whilst the use of the term ‘repudiation’ in this broad sense is probably too well ingrained among lawyers to be abandoned, it is not a helpful use of the term. There are other equally suitable ways of describing such breaches, and in any event the English word ‘repudiation’⁷ is not really appropriate to describe a situation where the party in default has committed a breach of contract that is serious enough to justify termination without necessarily indicating any unwillingness or inability to perform his or her contractual obligations as they arise in the future. For this reason we shall in the present work use the word ‘repudiation’ to describe serious breaches with such a future element. However, this must be read subject to two qualifications.

7.03  The first is that though the word ‘repudiation’ suggests an unwillingness or refusal to perform—what is sometimes termed ‘renunciation’⁸—it can also include the situation in which the defaulting party, though perfectly willing to perform when the time comes, is incapable of doing so.⁹ In this situation the party in question is said to be ‘totally and finally disabled’ from performing,¹⁰ and the other party may terminate. This will be discussed later.¹¹

7.04  Nor is it clear to what extent a renunciation will amount to a repudiation in the sense of a fundamental breach or one going to the root of the contract. According to Lord Diplock in The Afovos¹² a renunciation will only give rise to a right of termination if the threatened non-performance would, in his words, ‘have the effect of depriving that other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the primary obligations of the parties under the contract then remaining unperformed’; in other words, the non-performance must (p. 188) itself satisfy the criteria of a fundamental breach. However, this is by no means clear from the cases, some of which suggest a less stringent test. Say, for instance, a buyer of goods on instalments were to declare his or her intent to pay for each instalment a week late. In the case of actual breach this would not give rise to a right of termination, as the time of payment is a mere warranty,¹³ and breach of warranty does not of itself give rise to a right of termination. On the other hand, such a declaration might in certain circumstances entitle the innocent party to terminate on the basis that it called into question the readiness and willingness of the defaulting party to perform other more important terms in the future.¹⁴ This matter is discussed more fully later,¹⁵ but as the law stands the precise relationship between the doctrines of fundamental breach, repudiation, renunciation, and anticipatory breach has still not been entirely worked out.

7.05  As in relation to breach of condition and fundamental breach generally, there are a number of legal concepts closely akin to repudiation, but which must nevertheless be distinguished from it.

7.06  Breaches of condition are sometimes discussed in terms of repudiation; thus, for instance, section 11(3) of the Sale of Goods Act 1979 describes a breach of condition as giving rise to the right to ‘treat the contract as repudiated’, and similar terminology can be found in the cases.¹⁶ However, the analogy is an unhelpful one for a number of reasons; for one thing, the theoretical basis of discharge for breach of condition is very different from that for repudiation,¹⁷ and in any event not all breaches of condition necessarily indicate any lack of readiness and willingness by the party in default to perform in the future, still less to the necessary degree of seriousness.¹⁸ It has been said that the reference to repudiation in this context is no more than contractual shorthand for the right to terminate,¹⁹ and this is in accordance with the proposition that though breach of condition and repudiation both give rise to the right to terminate, they do so on different grounds.

7.07  As we have seen, Lord Diplock in The Afovos confines repudiation to cases where ‘the threatened non-performance would have the effect of depriving that other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the primary obligations of the parties under the contract then remaining unperformed’,²⁰ or to put it more briefly, goes to the root of the contract or amounts to a fundamental breach on the basis of the criteria set out in the previous chapter.²¹ However, the precise relationship between repudiation and fundamental breach is not as clear as it might be. Clearly not all fundamental breaches involve repudiation in the sense of an absence of readiness and willingness to perform the contract in the future, as the innocent party may be entitled to terminate purely on the basis of the effects of the breach that have already occurred in the past.²² So not all fundamental breaches involve repudiation, but do all repudiations involve fundamental breach? Certainly Lord Diplock suggests that they do, but this has been disputed. Thus, for instance, repudiation may encompass not only cases of prospective breach of condition²³—for instance, a declaration that the party in default is going to perform late in cases where time is of the essence—but even a refusal to perform obligations the actual breach of which would not give rise to a right of termination at all.²⁴ This question is discussed more fully later.²⁵

7.08  As with its sister doctrine of fundamental breach, the doctrine of repudiation bears close affinities with the doctrine of frustration, with which it shares a common root.²⁶ In particular frustration, no less than repudiation, looks forward as well as backward, in that an event may frustrate the contract not only on the basis of its effects in the past but also on the basis of its likely effects in the future.²⁷ However, there are clear differences between the two doctrines, the most obvious being that frustration, unlike repudiation, discharges both parties from their primary obligations and does not give rise to any secondary obligation to pay damages.²⁸ Another more subtle difference is in relation to the doctrine of anticipatory breach, where the cases establish that in the case (p. 190) of a non-performance that is purely prospective and involves no express or implied renunciation of contractual liability, it is not enough to show that the defaulting party was unlikely to perform in the future, but that he or she was totally and finally disabled from doing so.²⁹ Given the close affinity between the two doctrines, and given that in certain cases the line between them is a very fine one,³⁰ these distinctions can give rise to difficulties in the application of the law.³¹

7.09  In cases where time was not originally of the essence, or where an essential time stipulation had been waived, the courts of equity allowed the innocent party to serve a notice on the party in default setting a deadline for performance, on the basis that if this deadline was not met the contract would then be terminated.³² For many years this doctrine was treated as being distinct from the ordinary common law rules of termination, but in United Scientific Holdings Ltd v Burnley Borough Council ³³ Lord Simon sought to reformulate the doctrine in common law terms by declaring that failure to comply with a notice of this nature could be taken as evidence of repudiation, so that the contract could be terminated on that basis.³⁴ Though this analysis has been broadly accepted by the courts³⁵ it is not without its difficulties; be that as it may, the question is more fully discussed later.³⁶

7.10  Repudiation can occur in different ways, and it is sometimes important to know the way in which it is alleged to have occurred, as this may make a difference to the rules (p. 191) for determining whether a right to terminate arises. The basic idea behind repudiation is, in the words of Lord Coleridge CJ, an intention to abandon and altogether to refuse performance of the contract,³⁷ but neither of these factors is essential; thus no subjective intention need be shown,³⁸ nor need a refusal to perform the contract in its entirety.³⁹ In fact, there are two variables here, the first relating to the conduct of the defaulting party and the second relating to whether this is or is not accompanied by an actual failure in performance. As far as the first of these is concerned, there are three possibilities, the first being where the defaulting party expressly refuses to perform in so many words (express refusal), the second where such a refusal is inferred from the circumstances (implied refusal), and the third where, without there being any absence of willingness to perform, the party in question has become unable to do so (inability). As far as the second variable is concerned, there may be an actual breach involved, or it may be a case of anticipatory breach. This gives us six possibilities in all:

1. (1)  express refusal accompanied by actual breach;

2. (2)  implied refusal accompanied by actual breach;

3. (3)  inability accompanied by actual breach;

4. (4)  express refusal without actual breach;

5. (5)  implied refusal without actual breach; and

6. (6)  inability without actual breach.

As we shall see, the sixth and last of these is the odd man out, repudiation being harder to establish in this case than in the other five.⁴⁰

7.11  According to the Court of Appeal in Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd ⁴¹ the two key questions in deciding whether repudiation has taken place are: (1) the ratio quantitatively which the breach bears to the contract as a whole, and (2) the degree of probability or improbability that such a breach will be repeated.⁴² In relation to the second of these, we need to consider another key factor in the equation, namely the attitude of the party in default. These factors will now be considered in more detail.

7.12  As a general rule a contracting party who indicates that he or she will not perform the contract at all will be held to have repudiated it.⁴³ However, there may be repudiation even in the absence of such an indication. In particular, a party may, in the words of Lord Wright, intend to fulfil the contract, but may be determined to do so only in a manner substantially inconsistent with his obligations and not in any other way.⁴⁴ One obvious way of doing this is for the defaulting party to indicate that he or she will only perform in part, as where an employer seeks to reduce the wages payable to an employee,⁴⁵ or where a buyer of goods seeks to reduce or withhold the price.⁴⁶ As a general rule, the principles for determining whether a prospective partial failure of performance of this kind will amount to repudiation are said to be the same as in the case of fundamental breach,⁴⁷ but there are three issues which call for further examination in the present context, these being: (1) cases where the defaulting party seeks to attach conditions to his or her agreement to perform; (2) whether a prospective breach of condition amounts to a repudiation; and (3) whether it is easier or harder to establish repudiation than it is to establish fundamental breach generally.

7.13  In some cases a party may repudiate the contract by saying that he or she will only perform if certain conditions are met. Thus, for instance, in The Apollonius a charterer was held to have repudiated the contract by refusing to pay hire unless the owners complied with an unwarranted demand to do certain repairs to the ship.⁴⁸ A similar result was reached in The Nanfri,⁴⁹ where the owners under a charterparty involving three ships became involved in a dispute with the charterers over deductions from hire. As a consequence the owners threatened to discontinue normal performance by instructing their masters not to sign ‘freight pre-paid’ bills of lading, insisting instead that they should all be ‘claused’ so as to incorporate the terms of the charters. This was held to be a repudiation, since the consequences for the charterers would have been catastrophic, and it was held to be no defence for the owners to say that their threats would not be carried (p. 193) out if the charterers stopped withholding hire.⁵⁰ On the other hand, where in Johnstone v Milling ⁵¹ a lessor indicated that he would not be able to raise the money to rebuild the premises as required by the lease, it was held that no repudiation had occurred, since the lessor was clearly willing to perform if he could.⁵² The difference between this and the other two cases seems to be the nature of the condition attached to the promisor’s performance. In the first two cases the promisor was seeking to impose as a condition of his or her own performance something to be done by the promisee, so effectively putting unlawful pressure on the promisee to agree to an alteration in the terms of the contract.⁵³ In the last case, however, the condition concerned something to be done by the promisor, and there was no indication that the promisor was not willing to do his or her best to ensure that that condition was fulfilled.⁵⁴

7.14  Another way in which the defaulting party can perform in a manner inconsistent with his or her obligations under the contract is to impose extra burdens on the promisee that are not warranted by that contract. In Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd ⁵⁵ a contract for the supply of petrol stipulated that payment was to be made on delivery, but after two of the defendants’ cheques had been dishonoured the suppliers indicated that from now on they would only supply petrol upon presentation of a bankers’ draft. This was held to be a repudiation of the supply contract;⁵⁶ in effect, the suppliers had evinced an intention no longer to be bound by the agreement by demanding cash where the contract provided for credit. Similarly in Metro Meat Ltd v Fares Rural Co Pty Ltd ⁵⁷ a seller of meat who indicated that no more instalments would be provided unless a bonus was paid for prompt delivery was held to have repudiated the contract thereby. A different result was reached in Vaswani v Italian Motors (Sales and Services) Ltd,⁵⁸ where a contract for the sale of a car provided for the payment of a deposit followed by the balance of the price on delivery. A clause in the contract provided that in certain circumstances the price could be increased. Following the payment of the deposit by the buyer, the sellers sought to demand an increased price under (p. 194) the provisions of this clause, and when this was not forthcoming claimed to be entitled to forfeit the deposit. It was held by the Privy Council that in the circumstances the demand for the increased price, though not in conformity with the relevant clause, did not amount to a repudiation. The demand was made in good faith, the sellers had not made delivery of the car conditional on payment of the increased price,⁵⁹ and indeed there was no indication that the buyers would have come up with the balance even if the sellers had asked for the price as originally agreed.⁶⁰

7.15  In all of the cases discussed so far the issue has been couched in terms of fundamental breach, the question being whether the prospective failure of performance ‘goes to the root of the contract’, or in the words of Lord Diplock deprives the party who has further undertakings to perform of ‘substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings’.⁶¹ What if the defaulting party indicates in advance that he or she will not perform a condition? In many cases, of course, the condition will be construed as such because the term is so important that, in the words of Fletcher Moulton LJ, its non-performance ‘may fairly be considered by the other party as a substantial failure to perform the contract at all’,⁶² and in such cases any refusal to perform will qualify as a repudiation under the ordinary principles set out previously. However, we have already seen that not all conditions can be described in this way,⁶³ and the question then arises as to whether a prospective refusal or inability to perform such a condition could give rise to the right to terminate. Say, for instance, a contract makes time of the essence, and the defaulting party indicates in advance that he or she will perform a day, or even an hour late.⁶⁴ Can the innocent party terminate in the absence of any indication that the delay will cause him or her any real prejudice? There are dicta in the cases which suggest that the innocent party has a general right to terminate for a prospective breach of condition,⁶⁵ and this is borne out by the decision of the Commercial Court in The Aktor.⁶⁶ Here it was decided by Christopher Clarke J that the sellers of a ship were entitled to terminate when the buyers insisted that they would pay the balance of the purchase price in Singapore rather than in Greece as stipulated by the contract. What is interesting here is that the term in question was construed as a (p. 195) condition on the grounds of commercial certainty,⁶⁷ and if this is right,⁶⁸ termination in these cases may take place irrespective of any prejudice caused by the prospective breach. This of course is at odds with the general requirement that repudiation should amount to ‘an intention to abandon and altogether to refuse performance of the contract’.⁶⁹ A contractual right of termination cannot be exercised before it accrues,⁷⁰ and it could be argued in this as in other contexts⁷¹ that to allow this to be done in cases of prospective breach of condition places undue weight on the admittedly tricky and fine distinction between conditions and contractual rights of termination.⁷²

7.16  According to Lord Wilberforce, repudiation is ‘a drastic conclusion which should only be held to arise in clear cases of a refusal, in a matter going to the root of the contract, to perform contractual obligations’,⁷³ and the orthodox view is that a prospective breach will not amount to repudiation in circumstances where the actual breach of the same sort would not be sufficiently serious to justify termination;⁷⁴ as Lord Diplock indicates, the non-performance threatened must itself satisfy the criteria of a fundamental breach.⁷⁵ That said, not all of the cases on the topic are easy to reconcile with this test. In Withers v Reynolds,⁷⁶ a case involving the sale of straw by instalments, the buyer intimated that he would no longer pay for each instalment on delivery as agreed, but would henceforth pay one instalment in arrear. This was held to be a clear repudiation, but it is by no means evident that if the buyer had actually done this without indicating in advance that he would do so the breach would necessarily have given rise to a right of termination;⁷⁷ as has been said, the breach of an intermediate term cannot be regarded as sufficiently serious merely because of prior breaches.⁷⁸ Similarly, in Rigby v Ferodo Ltd,⁷⁹ where an employer announced a 5 per cent cut in wages, this was said to amount (p. 196) to a repudiation,⁸⁰ but it is by no means clear how such a reduction could be said to satisfy the test for fundamental breach put forward by Lord Diplock, which requires proof that the breach would deprive the innocent party of substantially the whole benefit of the contract. Perhaps the answer may lie in the notion that an outright refusal to perform one’s contractual obligations in the future is, in some sense, more serious than actual failure to do so, in so far as it may demonstrate a cavalier disregard of those obligations.⁸¹ In this connection it is perhaps also significant that whereas an actual breach can be remedied in damages without recourse to termination, an unaccepted repudiation, in the famous words of Asquith LJ, is a thing ‘writ in water’;⁸² so unless the innocent party is allowed to terminate in these circumstances, he or she will have no remedy at all.

7.17  The second key factor identified by the Court of Appeal in the Maple Flock case was the risk of the breach occurring in the future.⁸³ This is a crucial factor; since English law provides no mechanism allowing a promisee to demand an assurance of future performance,⁸⁴ termination may be the only way of resolving an uncertainty in this regard.⁸⁵ In the Maple Flock case itself it was held that no repudiation had occurred, one of the reasons being that the chance of the breach being repeated in the future was ‘practically negligible’.⁸⁶ This case can be contrasted with Warinco AG v Samor SpA,⁸⁷ where a contract for the sale of rapeseed oil provided for delivery in two instalments. The buyers refused to accept the first instalment on the ground that it was not of merchantable quality, and when the sellers asked whether the second instalment would be accepted, said that they would do so only if it was in accordance with the contract. It was held by the Court of Appeal that the sellers were entitled to infer that the second instalment would also be rejected and to terminate on that footing. Obviously the question of whether the risk of future non-performance is sufficiently serious to justify termination (p. 197) in any individual case depends very much on the circumstances of that case, but there are three situations which deserve particular comment in this connection, the first of these being the relevance of repeated breaches, the second is the issue of early breaches in instalment contracts, and the third the degree of likelihood that has to be shown in cases of this sort.

7.18  A breach cannot be classified as fundamental merely because similar breaches have occurred in the past,⁸⁸ but repeated breaches of the same obligation may entitle the innocent party to conclude that such breaches will continue to occur in the future, and to terminate on that basis. In Robert A Munro & Co Ltd v Meyer ⁸⁹ a contract for the sale of bonemeal provided for delivery in twelve monthly instalments. The first four instalments were all subsequently found to be adulterated, and it was held that the buyer would have been entitled on this basis not only to reject the bad instalments but to terminate the contract as a whole.⁹⁰ A similar result was reached by the High Court of Australia in Associated Newspapers Ltd v Bancks,⁹¹ where the plaintiffs on several occasions published the defendant’s cartoon inside the comic section rather than on the front as stipulated by the contract; such conduct was held to evince a refusal to be bound by the contract. In Rice (t/a Garden Guardian) v Great Yarmouth Borough Council,⁹² a case involving numerous breaches by the claimant over the first year of a four-year contract to maintain parks and gardens owned by the council, the issue was said to be whether the cumulative effect of the breaches in question was sufficient to justify the defendants bringing the contract to a premature end. In the words of Hale LJ:⁹³

What is significant here is not so much that the breach has occurred on more than one occasion in the past, but that every repeated breach increases the risk of the innocent party ultimately being deprived of the benefit of the contract as a whole.⁹⁴

7.19  Another key factor in this context is the time when the breach takes place, the principle being that early breaches are more likely to constitute repudiation than later ones. Most of the cases on this point relate to instalment contracts,⁹⁵ the question being whether default on one or more instalments is enough to constitute repudiation of the contract as a whole.⁹⁶ Particular issues arise where the default relates to the very first instalment, and some of the older authorities even go so far as to suggest that such a default will always amount to a repudiation as a matter of law.⁹⁷ However, in Mersey Steel and Iron Co Ltd v Naylor, Benzon & Co⁹⁸ the question was said by the House of Lords to be one of degree, and the better view now is that it depends on the circumstances of the individual case.⁹⁹ In Millar’s Karri and Jarrah Co (1902) v Weddell Turner & Co,¹⁰⁰ a case involving a contract for the sale of timber, the first delivery was found to be defective. It was held that the buyers were entitled not merely to reject that consignment but to terminate the entire contract. In the words of Bigham J:¹⁰¹

Clearly this inference will, other things being equal,¹⁰² be much stronger in relation to early instalments than in relation to subsequent ones.¹⁰³ However, a lot will depend on the facts of the given case; in particular, whether the defaulting party is aware of the breach or not, and whether, if so aware, he or she demonstrates a willingness to remedy it in relation to future instalments.

7.20  Does it have to be shown that the future breach is certain to occur, or will some lesser degree of likelihood suffice? The answer differs here depending on the way the repudiation is alleged to have taken place, and in particular whether or not it was accompanied by an actual breach. Where an actual breach has occurred, the rule is stated in terms of degrees of probability or likelihood,¹⁰⁴ the idea being that, as in the case of (p. 199) frustration,¹⁰⁵ the innocent party is entitled to act on the basis of reasonable commercial probabilities. Where there is no actual breach—that is to say in cases of anticipatory breach—the position is more complicated. Where there has been an express or implied refusal to perform or ‘renunciation’, the rule is the same as for cases of actual breach,¹⁰⁶ but where the alleged repudiation is based on impossibility, it seems that the innocent party cannot proceed on the basis of mere probability or likelihood; rather, he or she must establish that the party in default was ‘wholly and finally disabled’ from performing.¹⁰⁷ This curious anomaly will be discussed later in the section on anticipatory breach.¹⁰⁸

7.21  The third crucial factor is the attitude of the defaulting party to the contract and to its future performance. In cases where there is no express refusal to perform, the question that the court must ask is an objective one, in that what does or does not amount to a sufficient refusal is to be judged in the light of whether a reasonable person in the position of the party claiming to be freed from the contract would regard the refusal as being clear and absolute.¹⁰⁹ There are two key aspects to this, one being whether the breach itself was deliberate or accidental, and the other being whether it was committed in good faith.

7.22  The mere fact that a breach was deliberate will not of itself justify termination;¹¹⁰ as Lord Wilberforce pointed out when discussing the issue in the Suisse Atlantique case,¹¹¹ some deliberate breaches may be of a minor character that can appropriately be sanctioned by damages.¹¹² However, as Lord Wilberforce went on to say, such a breach may give rise to a right for the innocent party to refuse further performance because it (p. 200) indicates the other party’s attitude towards future performance.¹¹³ This will be particularly so where the contract is one which involves a relationship of trust and confidence between the parties, such as a contract of agency¹¹⁴ or of partnership¹¹⁵ or employment,¹¹⁶ though the fact that the breach was deliberate may be of relevance in other contexts as well.¹¹⁷ Even so, a deliberate breach—indeed a deliberate refusal to perform the contract at all—will not necessarily amount to repudiation even in these circumstances. Whether it does so may depend on the reason for the breach, and on the motives of the party in default in committing it.

7.23  Even a deliberate refusal to perform will not necessarily amount to repudiation if it is done in good faith.¹¹⁸ This was established by the House of Lords in Mersey Steel and Iron Co Ltd v Naylor, Benzon & Co,¹¹⁹ where the crucial issue was whether the refusal by the defendants to pay for a quantity of steel delivered by the plaintiffs entitled the latter to terminate performance. The facts were that shortly before payment became due a petition had been brought before the court to wind up the plaintiffs’ company, and the defendants were then advised by their solicitors that it would not be safe for payment to be made without the sanction of the court. The defendants therefore suggested to the plaintiffs that this should be obtained, but indicated that they would not pay the money over until this was done. The plaintiffs then sought to cancel the contract, but it was held by the House of Lords that in the special circumstances of the case no repudiation had taken place. In the words of the Lord Chancellor:

A similar result was reached by the Court of Appeal in Laws v London Chronicle (Indicator Newspapers) Ltd,¹²¹ where the plaintiff was dismissed from her employment (p. 201) for refusing to obey an order by the managing director. A heated argument had taken place at a meeting between the director and the plaintiff’s immediate superior, and the latter had left the room, instructing his assistants to accompany him. The plaintiff then did so, despite an order by the director that she should stay, and was then summarily dismissed. In a claim by the plaintiff for wrongful dismissal it was argued by the defendants that a deliberate refusal by an employee to obey orders was tantamount to a repudiation,¹²² but it was held that in the special circumstances of this case no repudiation had taken place. The plaintiff had been put in an impossible position, and it could not be said that her conduct amounted to such a deliberate disregard of the conditions of service as justified the employer in summarily dismissing her.¹²³

7.24  Neither of these cases involved a complete refusal to perform the contract in its entirety, but even where this is so the good faith of the party in default may sometimes negative repudiation, as is shown by the decision of the House of Lords in Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd.¹²⁴ In this case a contract for the sale of land provided a right of rescission if prior to the date of completion compulsory purchase procedures should have been initiated. In fact, as both parties were aware, such procedures had already been initiated at the time the contract was signed. Land values having fallen, the purchasers subsequently sought to get out of the contract, and told the vendors that they intended to invoke the clause in question. The vendors said that if that were done they would take the matter to court. The purchasers then having purported to rescind the contract, the vendors brought an action for a declaration that they were not entitled to do so. However, when the purchasers sought to defend the action, the vendors then brought further proceedings claiming that the contract had been repudiated. It was subsequently admitted by the purchasers that no right of rescission had arisen. As a general rule such conduct would amount to an unlawful repudiation,¹²⁵ but it was held by the House of Lords, by a majority of three to two,¹²⁶ that in the circumstances of the case no repudiation had taken place; though the vendors had sought to exercise a right of rescission to which they were not entitled, their conduct taken as a whole did not demonstrate the necessary refusal to be bound by the contract.¹²⁷ In the words of Lord Wilberforce:¹²⁸

7.25  The proposition that a party can purport to rescind a contract without indicating a refusal to be bound by it is at first sight odd to say the least,¹²⁹ but Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd has been explained on the ground that the vendors did not have to act at once; given that the date for completion was still some time in the future, and legal proceedings were still pending, they could have waited for the conclusion of those proceedings before deciding what to do.¹³⁰ In most cases, however, this will not be a realistic option. In The Nanfri ¹³¹ the shipowners under a time charterparty involving three ships became involved with a dispute with the charterers with regard to deductions made from the hire by way of purported set-off. Having taken legal advice with regard to the matter, they gave instructions to the masters to refuse to sign bills of lading marked ‘freight pre-paid’ and to insist that all bills of lading should be ‘claused’ so as to incorporate the terms of the charters. On the facts found by the umpire, the consequences of this move would have been catastrophic to the charterers; not only would they have been unable to carry out their normal trade, but they risked being blacklisted by the relevant trade association.¹³² The charterers therefore entered into a ‘without prejudice’ agreement whereby in the interim the vessels remained in service, the deductions from hire were discontinued, and the owners’ instructions suspended. However, in subsequent legal proceedings it was contended by the charterers that the owners had repudiated the contract. The owners argued that, so far from this being the case, there had not been a breach of contract at all; their instructions to the masters had been fully within the terms of the charterparty. In any event, it was argued, their action should not be taken to be repudiatory in the circumstances of the case; the question had been referred to arbitration, and once the issue had been cleared up the charters would continue to be operated in accordance with the arbitrators’ decision. This argument, however, was rejected by the House of Lords. As Lord Wilberforce said:¹³³

7.26  It seems that only in exceptional cases will a party be able to rely on a claim of good faith misconstruction as a defence to repudiation. In particular, it seems that: (1) the party seeking to raise such a defence must at least be able to identify the provision in the contract upon which he or she is seeking to rely; (2) that provision must at least on the face of it purport to grant a right of termination; and (3) he or she must be able to show a readiness and willingness to perform the contract in the event of the provision being held to be inapplicable.¹³⁴ In Dalkia Utilities Services plc v Celtech International Ltd ¹³⁵ a firm of energy suppliers sought to terminate the contract for failure to pay outstanding charges on the footing of an express clause in the contract. The question arose whether, assuming that the termination was wrongful,¹³⁶ it could be construed as a repudiation. It was held by the court that it could, and that Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd could be distinguished on four grounds: (1) the time of performance in that case had not arrived; (2) the innocent party needed to serve a notice of termination in order to reserve its position; (3) the discussions between the parties had proceeded on the basis that the service of a notice was not to be regarded as a hostile act; and (4) it was accepted by both parties that once the matter had been decided by the court they would both abide by it.¹³⁷ In the present case, however, the position was very different; the time for performance had arrived, there were no ongoing discussions, the suppliers were continuing to insist on the validity of their notice of termination and to claim damages on that basis, and there was no understanding that they would be ready to continue performance should their interpretation of the contract turn out to be wrong.¹³⁸

7.27  In most cases a repudiation, though relating to future obligations, will also involve breach of an existing obligation by the defaulting party. In some cases, however, the repudiation will relate entirely to the future, and where this occurs we have a case of ‘anticipatory’ breach. The leading case here is Hochster v de la Tour,¹³⁹ where the plaintiff agreed to serve as a courier for the defendant on a forthcoming tour of the Continent. Some weeks before the tour was due to begin, the defendant wrote to the plaintiff cancelling the engagement. It was held that the plaintiff was entitled to sue at once for damages, even though the date for performance had not arrived. In the words of Lord Campbell CJ:¹⁴⁰

7.28  Likewise, in Frost v Knight,¹⁴¹ where the defendant promised to marry the plaintiff as soon as his father died, and then called off the engagement, it was held that the plaintiff could bring an action at once without having to wait until the death took place. In cases of this sort, in the words of Cockburn CJ:¹⁴²

(p. 205) 7.29  For the most part cases of anticipatory breach are governed by the general law of repudiation,¹⁴³ but there are five topics that further attention in this context, namely: (1) the justification for the doctrine; (2) its theoretical basis; (3) the ways in which anticipatory breach may be proved; (4) the effect of such a breach; and (5) the problem of substantially executed contracts.

7.30  Where one party indicates to the other in advance that he or she will not perform, it clearly makes good sense to allow him or her to terminate and sue for damages at once without having to wait until the due date. Various justifications for this are set out by Campbell CJ in Hochster v de la Tour:¹⁴⁴ the defaulting party has rendered it impossible for him or her to perform on the day; the parties having entered into a contractual relationship, there is a breach of an implied promise that neither of them will do anything to the prejudice of the other inconsistent with that relationship; allowing an immediate cause of action spares the innocent party from having to waste time and effort preparing to perform; the defaulting party having represented that he or she is not going to perform, the innocent party is entitled to act on that representation. One justification for the doctrine is that it protects the legitimate expectation of the innocent party in receiving the performance of the other—an expectation on the basis of which he or she may have incurred expenses, say in making contracts with third parties relating to the same subject matter.¹⁴⁵ Another is based on economic efficiency; by allowing the innocent party to cut loose at once without waiting for performance, both parties are left at liberty to use their resources to more productive ends.¹⁴⁶

7.31  Whatever the practical justification for the doctrine may be, its theoretical basis is a matter of dispute.¹⁴⁷ The label ‘anticipatory breach’ clearly suggests that the effect of the doctrine is to bring forward a future liability by deeming a prospective breach to have taken place already. This position is reflected in the words of Cockburn CJ in Frost v Knight to the effect that ‘the eventual non-performance may therefore, by anticipation, be treated as a cause of action’.¹⁴⁸ The main advantage of this theory is that it reflects the difference between an actual breach (which gives rise to a right of damages as of (p. 206) right) and an anticipatory breach (which only does so if and when it is ‘accepted’ by the innocent party).¹⁴⁹ The difficulty here lies in explaining why the law should allow a party to sue on the basis of a breach which in fact may never take place.¹⁵⁰ As well as this, the theory looks rather contrived, and it does not tally either with the rules for the assessment of damages¹⁵¹ nor with a line of cases suggesting that the breach occurs at the place of the repudiation rather than at the place where performance was due.¹⁵² As against this in The STX Mumbai¹⁵³ the Singapore Court of Appeal, following an exhaustive review of the relevant case law and commentary thereon,¹⁵⁴ concluded that the best rationale was an actual breach by the party in default of his or her obligation to be ready and willing to perform.¹⁵⁵ This is certainly a much more satisfying and elegant approach, but it is hard to reconcile with the ‘acceptance’ requirement. A third possibility is canvassed by Liu, who argues that though all anticipatory breaches must be serious enough to justify termination, the breach itself is essentially free-standing in nature and should not depend on that right of termination actually being exercised by the innocent party.¹⁵⁶ In the end, as Carter suggests, it may be that no one theory can account for all the different ramifications of the doctrine;¹⁵⁷ perhaps it is better to admit that it is essentially an artificial construct¹⁵⁸ based not so much on a coherent conceptual framework as on considerations of commercial convenience.¹⁵⁹

7.32  According to the traditional classification, an anticipatory breach can be established either by renunciation or by prospective impossibility.¹⁶⁰ Renunciation occurs when the defaulting party, in advance of the time of performance, evinces a clear and absolute refusal to go on with the contract. Prospective impossibility occurs when that (p. 207) party disables himself or herself from performing. Though these two modes of anticipatory breach are said to be difficult to disentangle,¹⁶¹ it is nevertheless essential that they be disentangled,¹⁶² as the former is much easier to establish than the latter. The leading case here is Universal Cargo Carriers Corporation v Citati,¹⁶³ which concerned a voyage charterparty for the carriage of a cargo of scrap iron from Basrah to Buenos Aires. Under the terms of the contract the charterers were bound to complete loading by 21 July 1951. The ship arrived at the loading port on 12 July, but no cargo was ready, nor was there any reasonable prospect of one being made available in the foreseeable future. On 18 July, three days before the expiry of the lay days, the owners decided to throw up the charter and claimed damages from the charterers on the grounds of repudiation. The case went to arbitration, the key issue being whether, assuming the charterers’ breach to be anticipatory,¹⁶⁴ the owners were entitled to terminate. The arbitrators having found for the shipowners both on the grounds of renunciation and on the grounds of impossibility, the court then had to decide whether the arbitrators had adopted the correct approach.

7.33  The first possibility canvassed by Devlin J was an anticipatory breach by renunciation. The essence of renunciation, as previously stated, is an absence of willingness to perform the contract. In the words of Devlin J:¹⁶⁵

Where this happens, there is no need for the innocent party to show that the contract would not, in fact, be fulfilled. Rather, as Devlin J said, if a man proclaimed by words or conduct an inability to perform, the other party could safely act upon it without having (p. 208) to prove that when the time for performance came the inability was still effective.¹⁶⁶ As we have seen, the owners succeeded before the arbitrators on this ground, and there was good evidence to back up this finding. As Devlin J put it:¹⁶⁷

Thus a renunciation may be found to have occurred whether the defaulting party declares in so many words that he or she is unable to perform¹⁶⁸ or whether such inability is manifested by conduct on his or her part, as where A agrees to sell land to B and then sells the very same land to C.¹⁶⁹ However, that was not the end of the matter. Unfortunately for the owners, the arbitrators were held to have misdirected themselves on the point by taking irrelevant factors into consideration.¹⁷⁰ It was therefore necessary to see whether the owners were entitled to succeed on the second issue, that of impossibility.

7.34  Impossibility is far more difficult to establish, the test here being whether the innocent party can prove that at the relevant time the defaulting party was ‘wholly and finally disabled’ from performing.¹⁷¹ This is in stark contrast not only to the position with regard to repudiation generally,¹⁷² but to the law of frustration where, according to Scrutton J in Embiricos v Sydney Reid & Co:¹⁷³ ‘Commercial men must not be asked to wait until the end of a long delay to find out from what in fact happens whether they are bound by a contract or not; they must be entitled to act on reasonable commercial probabilities at the time when they are called on to make up their minds.’ However, Devlin J went on to say that the Embiricos principle had no application to cases of anticipatory breach,¹⁷⁴ (p. 209) the reason being that it would be unjust to subject a party to damages¹⁷⁵ in the absence of proof either that he or she was unwilling to perform or that the breach was inevitable.¹⁷⁶ In the words of Devlin J, an anticipatory breach must be proved in fact and not in supposition.¹⁷⁷

7.35  The approach of Devlin J in the Citati case has been subjected to criticism on a number of grounds; in particular, it is said to impose too heavy a burden on the innocent party, who runs the risk of being held to have repudiated the contract by terminating even though any sensible businessman would have concluded that performance by the party in default was very unlikely to be forthcoming.¹⁷⁸ For this reason it is argued by Liu and others that a reasonable inference should be enough to justify termination in this context as well,¹⁷⁹ though not necessarily a claim for damages.¹⁸⁰ However, the problem is perhaps more apparent than real; given that virtually all cases of impossibility can also be construed in terms of implied renunciation, cases where the former has to be relied on are likely to be few and far between.¹⁸¹

7.36  Where an anticipatory breach occurs, the innocent party has the same choice as exists in the case of breach of condition and fundamental breach generally, namely either to terminate performance by ‘accepting’ the breach or to affirm the contract.¹⁸² If the innocent party terminates, the result is the same as in other cases of termination, in that the primary obligations of both parties, in so far as they are still outstanding, need generally no longer be performed.¹⁸³ In the same way, the party in default now has (p. 210) a secondary obligation—the so-called ‘anticipatory secondary obligation’¹⁸⁴—to pay damages to compensate the innocent party for loss in respect of his or her non-performance of the primary obligation. If the innocent party affirms, the primary obligations of each party remain binding, but here in contrast to cases of actual breach, there is no secondary obligation, the general rule being that an unaccepted repudiation is a thing ‘writ in water’,¹⁸⁵ and that damages for an anticipatory breach only accrue in the event of termination.¹⁸⁶ However, even an unaccepted repudiation may have some effect in cases of this sort; in particular, where the innocent party changes his or her position in reliance on the repudiation, the party in default may not be allowed to retract it.¹⁸⁷

7.37  One tricky issue is the extent to which the doctrine of anticipatory breach can apply to a fully or partly executed contract. Two questions arise in this connection, the first in relation to performance by the innocent party and the second in relation to performance by the party in default.

7.38  Can a party who has completed performance terminate for anticipatory breach? In The STX Mumbai¹⁸⁸ an oil company supplied bunkers to a ship, but then on hearing that the owners had filed for bankruptcy purported to terminate the contract and had the ship arrested. It was argued before the Singapore Court of Appeal by the shipowners that the right to terminate for anticipatory breach had no application here, since the company had fulfilled all of its obligations. However, this was held to be no bar on the basis that a party to a contract who evinced an intention not to perform¹⁸⁹ was guilty of committing an actual breach then and there.¹⁹⁰ In the words of Andrew Phang JA:¹⁹¹

(p. 211) The point here was that if the suppliers had waited until the time for payment was due, they would have probably ended up with nothing. It therefore made sense for them to try to bring things to a head by terminating for anticipatory breach. But such cases are likely to be rare.¹⁹² Given that in most cases of anticipatory breach the innocent party will be seeking to be discharged from fulfilling his or her own primary obligations under the contract, there will be no point in asking for termination where there are none left to fulfil.

7.39  The converse problem is where the defaulting party has largely completed his or her performance under the contract but then indicates that he or she is not going to finish the job.¹⁹³ To take an example given by the Law Commission,¹⁹⁴ say a painter agrees to decorate a house and then return a year later to do any necessary touching up. The main part of the work is duly completed, but the painter then indicates that he or she will not come back to do the touching up. Any anticipatory breach will, of course, become an actual breach once the time for performance arrives,¹⁹⁵ but according to the law as it stands, there is nothing the customer can do in the meantime except wait until the twelve months has passed, since taken in the context of the contract as a whole the painter’s default would not be serious enough to justify termination. This seems unfair to the customer, who may wish to get someone else in to do the job. One way round this conundrum would be to allow the innocent party to claim damages in this sort of case without termination of the contract as a whole, but as stated previously, this does not fit in with the present state of the law. As Andrews points out, there seems to be a gap in the law here.¹⁹⁶

7.40  The main practical advantage in commercial terms of allowing termination for repudiation is that it enables the innocent party to deal with the problem of uncertainty as to future performance; rather than having to waste time and expense waiting for the other party to render a performance which may never be forthcoming, the innocent party can ‘cut loose’, as it were, and use his or her resources for more profitable ends. However, this is not the only way in which the law deals with this problem. Another way is to allow the innocent party to give the party in default one last chance to perform, and to say that if this chance is not taken then the contract will be terminated. In (p. 212) the common law this can be done, at least in certain cases, by issuing a notice making time of the essence.¹⁹⁷ In the remaining pages of this chapter we shall briefly consider the law regarding the issue of such notices before looking at how the procedure relates to the principles discussed earlier.¹⁹⁸

7.41  The procedure whereby a notice of this sort may be issued was developed by the old court of Chancery at the beginning of the nineteenth century in relation to contracts for the sale of land. Time was not generally of the essence in relation to contracts of this sort, but in the event of late completion either by the vendor or the purchaser, the other party could serve a notice requiring this to be done by a certain date. Assuming the notice to be in order, the party in default was then required to complete the sale by the date set, failing which the innocent party could then cancel the sale.¹⁹⁹ Since then the law has developed in a number of respects; in particular, by extending the procedure to other types of contract, and by enabling similar notices to be served in relation to particular terms of the contract. A fuller account of these developments can be found elsewhere,²⁰⁰ but the current principles²⁰¹ may be conveniently outlined under four headings: (1) the requirements for the issue of a notice; (2) the obligation in relation to which a notice may be served; (3) the content of the notice; and (4) the effect of the notice.

7.42  There are two basic requirements for the service of a notice of this kind, the first being that the party who wishes to serve the notice must be fully ‘able, ready and willing’ to perform, and the second undue delay by the party in default.²⁰² The first requirement involves showing that the party serving the notice is not presently guilty of any significant outstanding default on his or her contractual obligations,²⁰³ and that he or she is (p. 213) ready and willing to perform his or her future obligations as and when they arise.²⁰⁴ The second requirement involves showing that the defaulting party has failed to perform on time, either by breaching an express time stipulation²⁰⁵ or, in cases where the contract is silent as to time, by failure to perform within a reasonable time.²⁰⁶ As well as this, it may be possible in some cases to serve a notice even before the time for performance arrives; in particular, where no time for performance is set, but where such time would have been of the essence if set, the promisee may effectively set such a time by serving a notice to that effect. This gives the promisor due warning that if he or she does not perform at that time, the contract will be terminated.²⁰⁷

7.43  Many, if not most, of the cases in this area of the law involve what is termed a ‘notice to complete’, in which a vendor or purchaser of land is given one last chance to enter into the conveyance.²⁰⁸ Given that a failure to complete is tantamount to a failure to perform the contract at all, one can see why the law allows termination in this situation.²⁰⁹ However, one can also have a ‘notice to perform’, which relates to a particular term of the contract,²¹⁰ and the question then arises how important the term must be for the procedure to apply.²¹¹ Given that, as we shall see, failure to comply with a notice of this sort is currently analysed in terms of repudiation,²¹² the procedure obviously cannot be allowed to apply in relation to any and every term of the contract, however minor.²¹³ Rather, as has been stated by Sir Terence Etherton, the question must be whether the defaulting party’s failure to perform is one which, if still persisted in on the expiry of the notice, would amount to a repudiation of the contract.²¹⁴

7.44  Even if a notice is validly served, it may still fail because of inherent defects. This has a number of aspects to it.²¹⁵ First of all, the notice must set out clearly what has to be (p. 214) done, no more and no less.²¹⁶ Secondly, it must give the other party a reasonable time to do it,²¹⁷ though this may be less important in instances where the delay has been very protracted,²¹⁸ since, as Lord Parker said, a party cannot claim as a result of his or her own past delay to be entitled to a longer period of notice than would otherwise have been the case.²¹⁹ Finally, it must set out the consequences of default in clear and unambiguous terms;²²⁰ it has been suggested that this is best done by saying in so many words that time is now of the essence, and that if the notice is not complied with the promisee reserves the right to terminate the contract.²²¹

7.45  If, having been served with a valid notice, the promisor fails to comply with it, the promisee will normally have the same choice as in cases of breach of condition or fundamental breach;²²² that is to say, he or she can either terminate performance²²³ or affirm the contract, say by serving further notices to the same effect.²²⁴ However, once served the notice binds the promisee no less than the promisor, so that if the giver of the notice subsequently refuses to perform or fails to do so without good reason, the recipient may in turn be entitled to terminate.²²⁵

7.46  What has all of this got to do with repudiation? Traditionally, as we have seen,²²⁶ the equitable doctrines relating to time were thought to operate entirely independently of the (p. 215) common law of termination, but in 1978 an attempt was made by the House of Lords to bring the two together in United Scientific Holdings Ltd v Burnley Borough Council.²²⁷ In this context Lord Simon sought to reinterpret the notice procedure in terms of repudiation, saying:²²⁸

The difficulty with this approach is that the ordinary principles of repudiation do not allow the innocent party to put the defaulting party ‘on the spot’ in this way; as Lord Denning pointed out, one party cannot seek to put on the other a repudiation where he or she has not actually repudiated.²²⁹ Whereas failure by the defaulting party to meet the set deadline under the notice procedure has traditionally given the innocent party a clear right of termination, such failure can now only be regarded by the common law as ‘evidence’ of repudiation and no more.²³⁰ It has been argued for this reason that the new interpretation is too vague, and that a ‘bright line’ approach would be preferable.²³¹ However, if the courts wish to continue to interpret the notice procedure in terms of the general principles of repudiation rather than as a separate doctrine in its own right, such vagueness is perhaps a price that must be paid.