CONTRACTLAWII

LAW2110
BREACHOFCONTRACT
OBJECTIVES

At the end of this topic, you should be able to:

(1) Discuss the general position on contractual
breach- when it occurs, how it operates;
(2) Discuss the consequences for breach;
(3) Explain the concept of anticipatory breach.
GENERAL POSITION ON BREACH OF
CONTRACT
◦ A contract is said to be breached when one
party performs defectively, differently from
the agreement, or not at all (actual breach),
or indicates in advance that they will not be
performing as agreed (anticipatory breach).
WHAT IS BREACH?

◦ A breach of contract will occur where, without

lawful excuse, a party either fails or refuses to
perform a contractual obligation imposed on that
party by the terms of the contract or performs a
contractual obligation in a defective manner.
◦ However, the operation of a contractual breach
may differ depending on when it is breached, by
whom it is breached and the decisions taken by
the parties after the breach.
◦ Not every failure to perform will amount to a breach of contract.
◦ (E.g: If you buy a movie ticket and paid for it in advance and did not collect the ticket
nor turned up for the performance, this will not be a breach of contract since you as the
purchaser did not promise to attend the performance. The contractual obligation is to pay
for the ticket not to attend the performance.)
◦ In order to determine if there was a breach of contract, one must examine the terms
of the contract, both express and implied.
◦ Breach lies in the failure, without lawful excuse to perform a contractual
obligation.

◦ Failure includes:
◦ 1. An express refusal to perform the contract or a particular term of the
contract.
◦ 2. Defective performance
◦ 3. Incapacitating oneself from performing the contract

◦ Note: Not every failure to perform a contractual obligation will amount to a

breach of contract.
Alfred C Toepfer International GMBH v
Itex Hagrani Export SA [1993] 1 Lloyd’s
Rep 360, 362.

Locke Jr. V. Bellington Limited Et Al BB

2002 CA 42
 WHEN DOES BREACH OCCUR?

◦ 1. Breach by Repudiating One’s Liability Under

The Contract
◦ 2. Breach Before the Performance of the Contract
◦ 3. Breach During the Performance of the Contract
◦ 4. Breach by Rendering the performance of the
Contract Impossible
◦ 5. Breach by Failing to Fulfil the Contractual
Obligations
◦ The existence of a breach of contract is not generally dependent upon a
finding that the party said to be in breach has been at fault.
◦ Liability for breach of contract is strict.
◦ However, there are a line of cases where the court paid regard to the
good faith of the party in breach which entitled the other party to
terminate the contract.
◦ In Woodar Investment Development v Wimpey and Vaswani v Italian
Motors (Sales and Services) Ltd, the courts have been reluctant to conclude
that a party who has acted in good faith has repudiated the contract.
◦ However, in Federal Commerce & Navigation Co Ltd v Molena Alpha Inc
[1979] AC 757 the Court found that a party who acted in good faith
nevertheless did commit a repudiatory breach of contract.
 WHEN DOES BREACH OCCUR?
◦Woodar Investment Development Ltd v. Wimpey
Construction UK Ltd[1980] 1 WLR 277

◦Vaswani v Italian Motors (Sales) Ltd [1996] 1 WLR 270

◦Federal Commerce & Navigation Co Ltd v Molena

Alpha Inc [1979] AC 757. Jemmott V. Rodriguez TT
2009 HC 49
 BREACH BY REPUDIATING ONE’S LIABILITY
UNDER THE CONTRACT
◦This means that one contracting party has
indicated that he has no intention to
perform his contractual obligations.
◦This repudiation can occur before or during
the performance of a contract.
◦Grant Et Al V. Philip AG 2004 HC 17
 BREACH BEFORE THE
PERFORMANCE OF THE CONTRACT
◦ If A repudiates a contract he has entered into with B and he repudiates
it before the date which has been set for the performance of his
contractual obligations, B may accept the repudiation and sue A for
breach of contract. And the contract will be considered discharged
once B accepts the repudiation by A.
◦ Frost v Knight (1872) LR 7 Ex 111
◦ An anticipatory breach of contract gives the innocent party an
immediate cause of action. He is not required to wait for the time for
performance. The innocent party can seek a remedy immediately or
can choose to keep the contract and wait for the time for performance.
 BREACH DURING THE
PERFORMANCE OF THE CONTRACT
◦ A repudiation which occurs during the performance
of a contract will entitle the innocent party to sue
immediately for damages and to be released from
all his contractual obligations.
◦ Cort v Ambergate Railway Company (1851) 17 QB 127
◦ Grant Et Al V. Philip Ag 2004 Hc 17
BREACH BY RENDERING THE PERFORMANCE OF THE
CONTRACT IMPOSSIBLE
◦ It may sometimes happen that one contracting party may
through his own actions or inaction, make any further
performance of the contract a virtual impossibility. Such
an event can occur either before or during the course of
the contract. If this happens then the other party to the
contract is free to treat that contract as having been
discharged.
◦ Omnium D’Enterprises v Sutherland [1919] 1 KB 61
 BREACH BY FAILING TO FULFIL THE
CONTRACTUAL OBLIGATIONS
◦There can be a failure of performance of
contractual obligations by one contracting
party. If this happens the other contracting
party can treat the contract as at an end.
◦Hoare v Rennie (1859) 5 H&N 19
 CONSEQUENCES OF BREACH

A breach of contract does not

automatically bring a contract to an end.
◦ Decro-Wall International SA v Practitioners in Marketing
Ltd [1971] 1 WLR 361.
◦ Hamiltonian Hotel & Island Club Ltd. V. Daulphin BM 1990
CA 2
◦ Siri Hari Ram & Company Ltd. V. Ketwaroo GY 1992 CA 10
 CONSEQUENCES OF BREACH
◦ The innocent party is entitled to recover damages
in respect of the loss which he has suffered as a
result of the breach;
(1) The party in breach may be unable to sue to
enforce the innocent party’s obligations under the
contract;
(2) The breach may entitle the innocent party to
terminate further performance of the contract.
 DAMAGES
◦ Every breach of a valid and enforceable contract gives to
the innocent party a right to recover damages in respect
of the loss suffered as a result of the breach, unless the
liability for breach has been effectively excluded by an
appropriately drafted exclusion clause.
◦ An action for damages lies whether the term which is
broken is a condition, a warranty or an innominate term.
◦ Grains Jamaica Ltd V. The Peppersource Ltd JM
2004 CA 24
 ENFORCEMENT BY THE PARTY IN
BREACH

◦Taylor v Webb [1937] 2 KB 37

 THE RIGHT TO TERMINATE PERFORMANCE
OF THE CONTRACT

◦Johnson v Agnew [1980] AC 367 and

◦Photo Production Ltd. v. Securicor Transport
Ltd [1980] AC 827.
◦Husbands Et Al V. Caesar Et Al GY 2000 CA 9
 THE RIGHT TO TERMINATE
PERFORMANCE OF THE CONTRACT
◦ The entitlement of the innocent party to terminate depends on the
seriousness of the breach which took place.
◦ Two strategies employed by the Courts:
◦ 1. Look at the nature of the term broken
◦ If the term broken is of sufficient importance, the law will confer
upon the innocent party the right to terminate further performance of
the contract, irrespective of the consequences of the breach.
◦ Where the term broken is of little importance then the right to
terminate will not arise.
 WARRANTY, CONDITION,
INNOMINATE TERMS.
◦ A right to terminate will usually arise where the term broken is a
condition but not where the term broken is a warranty.
◦ Where the term broken is a warranty, it will give a claim for damages
but it does not give an innocent party the right to terminate further
performance of the contract.
◦ If the term broken is intermediate or innominate the right to terminate
will depend upon the consequences of the breach.
◦ Where the consequences are serious, a right to terminate will arise.
◦ Where the consequences are not serious, a right to terminate will not
arise and the innocent party will be confined to a remedy in damages.
 ANTICIPATORY BREACH
◦ If a party indicates in advance that it is not going to
perform, the other party may elect to terminate
immediately, rather than waiting for the date for
performance to arrive.
◦ While there are obligations still to be performed, one
party may indicate in advance that he or she intends to
break the contract. This is known as an ‘anticipatory
breach’, and will generally give the other party the right
to treat the contract as repudiated, and to sue at once for
damages.
 ANTICIPATORY BREACH
• Horchester v De La Tour (1853) 2 E & B 678
• Jarvis V. Shoppers Pharmacy AG 2010 PC 1
• Husbands Et Al V. Caesar Et Al GY 2000 CA 9
• Locke Jr. V. Bellingdon Limited Et Al Bb 2002
Ca 42
• Jemmott V. Rodriguez TT 2009 HC 49
 ANTICIPATORY BREACH
◦ Where the innocent party does decide to affirm
the contract and demand performance at the
stipulated time, a number of consequences flow
from this decision.
◦ (1) Affirmation does not prevent the innocent
party accepting the breach, if, at the date fixed
for performance, the other party still refuses to
perform;
 ANTICIPATORY BREACH
◦ (2) The innocent party, in addition to affirming the contract, may continue with the
performance of his obligations under the contract, even though he knows that the
performance is not wanted by that other party:

◦ White and Carter (Councils) Ltd v McGregor [1962] AC 413.

◦ The principle laid down in White and Carter is, the subject of a number of
qualifications.
◦ (i) The innocent party cannot compel the party in breach to cooperate with him so
that, where the innocent party cannot continue with performance without the
cooperation of the party in breach, he will be compelled to accept the breach:
◦ Housnslow LBC v Twickenham Garden Developments Ltd [1971] Ch 233;
◦ (ii) “there comes a point at which the court will cease, on general equitable
principles, to allow the innocent party to enforce his contract according to its strict
legal terms.” Lord Reid, in White and Carter.