DISCHARGE OF CONTRACT REVISION SHEET II Discharge of contract for Breach 1. INTRODUCTION Breach of contract always gives the innocent party the right to claim damages (see future lectures for how we calculate them). However, the innocent party may in certain circumstances also have the option of bringing the contract to an end because of the other party's breach. - Damages as of right - Sometimes can bring contract to end o Not significant in one-off contracts - more significant in in ongoing contracts - where future rights/ obligations to perform Introductory points (i) Breach of contract does not automatically bring a contract to an end. - Not like frustration that operates automatically - Breach merely gives innocent party the OPTION to terminate party in certain circumstances - A contract is only terminated for breach if the innocent party so elects - and not every breach gives the innocent party the right to terminate. Societe Generale, London Branch v Geys [2012] Facts: High paid investment banker sacked for breach of contract in November. He stood to earn a bonus of 12.5m euros if he was still employed in January of following year. He tried to string it out and claimed to not accept bringing contract to end until after January. Employer argued that sacking him auto ended the contract and so employee should miss out on bonus. Held: Employee one - orthodox contract principles applied. Breach of contract doesn't auto bring contract to end. Only when he accepted notice of termination and elected to bring contract to end. Damages included 12.5m. - The employee may have no realistic choice but to accept the repudiation, but it is still her act of acceptance that terminates the contract, which remains alive until that choice is exercised. Cf MSC Mediterranean Shipping Co SA v Cottonex Anstalt [2016] - CA controversial suggestion. - On the exceptional facts of the case, the contract terminated automatically in circumstances that amounted to repudiatory breach. - Facts: Cottonex hired containers owned by MSC to transport cotton to Bangladesh. Purchaser of cotton paif for it but failed to collect it and the port authorities in Bangladesh
impounded the containers so Cottonex were unable to return them to MSC. MSC alleged that contract required Cottonex to keep paying hire fee until containers returned. o First instance: Cottonex had eventually repudiated (rejected) the contract and although MSC had purportedly opted to reject and keep the contract alive, it had no legitimate interest in doing so. - Held: CA - reached same conclusion but different, orthodox route - they introduced an automatic discharge for breach. MSC's delay in redelivery had been so prolonged that the original contract had become "incapable of performance" and so "the innocent party cannot treat the contract as subsisting because it is no longer capable of performance as agreed". - How to distinguish from cases of frustration? o Thus, the automatic termination by breach can exceptionally occur if the contract can no longer be performed because of delay