4LW003 Contract Law Breach of Contract & Damages for Breach of Contract Outline Notes Breach of Contract Failure to perform all or part of the obligations will be a breach of contract. Whether a breach entitles the other to treat the contract as repudiated depends on whether the term broken is a condition, a warranty, or, if an innominate term, the seriousness of the breach. Where a breach is serious, the innocent party may accept the breach and treat the contract as discharged. Thus, it is not the breach itself that terminates the contract, it is the innocent party's acceptance of the breach which terminates the contract. However, a breach which goes to the root of the contract entitles the innocent party to refuse to perform their obligations and accept the other's breach as repudiation. Discharge will occur either as a result of the acceptance of a repudiatory breach or a repudiation. Repudiatory breach Must be a serious/fundamental breach which "goes to the root of the contract". Entitles the innocent party to either: a) ignore the breach, perform their part of the contract and sue for damages; or b) accept the breach and treat the contract as at an end and sue for damages (or other remedies). The general rule is that the party in breach cannot recover for work already completed. Cutter v Powell (1795) Bolton v Mahedeva [1972] Note: This rule has been mitigated by the doctrine of substantial performance, under which the party in breach is entitled to payment, subject to a counter claim for breach. Repudiation (anticipatory breach) Where a party to the contract indicates, expressly or impliedly, by words or conduct, that they do not intend to honour their obligations under the contract. Referred to as anticipatory breach. Hochester v De La Tour (1853) May be explicit, as in the above case, or implicit from the defendant's conduct. Must be an anticipatory breach of a serious/fundamental obligation. Afovos Shipping Co SA v Pagnan [1983] 1
It must be established, beyond reasonable doubt that the other party does not intend to perform their side of the contract. Mersey Steel and Iron Co v Naylor Benzon & Co (1884) Federal Commerce and Navigation Co Ltd v Molena Alpha Inc [1979] cf. Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd [1980] Innocent party can either: a) accept the repudiation as a discharge of contract and sue for damages immediately; or b) affirm the contract and wait until the time for performance and then sue. Avery v Bowden (1855) White & Carter (Councils) v McGregor [1962] Damages for Breach of Contract Damages are the only common law remedy for breach of contract. Where there has been a breach of contract, the innocent party is entitled to damages as of a right. The purpose of damages is to put the injured party in the position they would have been in if the contract had been performed. Remoteness of damage There must be a causal link between the loss or