A breach of contract may take several forms; Anticipatory Breach (or renunciation), Failure to Perform, Delayed Performance and Unsatisfactory or Defective Performance. In each of these cases one party has failed to carry out his obligations under the contract.
With Anticipatory Breach, one of the parties after the formation of the contract but before the date of performance of the contract advises that he no longer intends to fulfil his obligations. The innocent party has three options to resile and immediately sue for damages, to wait until the date of performance then sue for delayed performance or he may perform his side of the contract and claim the contract price.
In White and Carter (Councils) Ltd v McGregor., Lord Reid restates the above principles:
“the innocent party, has an option. He may accept that repudiation and sue for damages for breach of contract, whether or not the time of performance has come, or he may, if he chooses, disregard or refuse to accept it and then the contract remains in full effect”
The important point to note is that the breach did not terminate the contract, it only entitled the innocent party not in breach to resile and therefore terminate the contract.
When a Breach occurs the innocent party is afforded a legal remedy. The nature of the remedies available to him depends upon the materiality or the seriousness of the breach. When a material breach does occur the party in breach has repudiated the contract. Recission is a response to repudiation, but only where a material breach has occurred.
In Wade v Waldon. Lord President Dunedin stated:
“It is familiar law, and quite settled by decision, that in any contract which contains multifarious stipulations there are some which go so to the root of the contract that a breach of those stipulations entitles the party pleading the breach to declare the contract at an end”.
In this case a comedian contracted to perform in a theatre and one of the terms was that he should give a fortnight’s notice of his intention to appear, along with bill material. He failed to do so and the manager of the theatre refused to fulfil his agreement. It was held, although the comedian was in breach of contract and the theatre was entitled to recover damages, they were not entitled to repudiate the agreement, because the term in question was not material. Lord McLaren pointed out that:
“It is not the law…that every breach of contract, however trifling, would entitle the other party to bring the contract to an end, and to get out of his bargain. The question always is whether a stipulation which has been broken is of the essence of the contract”.
Rodger v Fawdry also illustrates that the innocent part can not resile where the breach by the other party is not a material one. Fawdry wrongly chose to treat Rodger’s failure to pay the price of land within a limited time as a material breach and he re-sold the land to another.
In Graham v United Turkey Red Co., an agent for the sale of goods agreed not to sell the same type of goods if supplied by anyone else. This decision was held to be a material term, the breach of which entitled the principals to repudiate the agreement.
These cases illustrate another point, that it is a question of the construction of each individual contract whether a particular breach is material or not. Further the materiality of a breach is not reduced by the belief of the party concerned that he was not in breach. This was found in Blyth v Scottish Liberal Club where Blyth was dismissed for failing to turn up for a meeting and refusing to take the minutes at another. It was held that this was a material breach and it made no difference that he was ignorant of his obligations.
Parties may expressly state any item to be material. If such an intention is clear then it will be given effect no matter how trivial the term appears to be.
As well as the Right of Rescission there are several other remedies available to the innocent party such as Retention and Lien. Another possible remedy is to obtain a decree ad Factum Praestandum, in other words a judicial order for specific implementation of what the party in breach contracted to do. The decree can be demanded as of right except in several instances, [Tutor’s comment] amongst these being, where it would be impossible to comply with the decree and where there is no pretium affectionis e.g. in the sale of an article on the open market, the appropriate remedy for a purchaser where the seller does not deliver is to buy the goods elsewhere and claim any difference in price as damages from the seller.
In an action for damages the pursuer must prove that there was a material breach of contract, that the loss or damage was attributable to that breach, that the loss has been mitigated and the extent or measure of the loss. It is not the purpose of damages to punish the party in breach but put the party not in breach into the position he would have been in had the contract been performed.
Now turning to Flora, she has entered into a contract with a shop for the sale of a TV, however in offering to enter a contract she has expressed she requires the TV before the opening of the World Cup. By stipulating that ‘time is of the essence’ Flora is advising the shop that if the TV is not delivered on time then she would treat this as a material breach of contract which goes to the root of the contract. It then occurs that the shop advise Flora after the formation of the contract but before performance that the delivery of the TV would be late by a few weeks. This is therefore Anticipatory Breach of a material term of the contract.
As we have seen Flora has several options, she could wait until the date of performance in the hope that the TV was delivered. If it was not delivered she could resile and sue for breach of contract, however this would not be a preferred option as her husband would then miss most of the World Cup. There would also be no point in Flora obtaining a court order for specific implement, as we have seen the court would not grant this order as a TV is something easily obtainable in numerous other shops.
Faced with the shop’s material breach she takes another course of action open to her and, sensibly accepts the shops repudiation, resiles immediately and decides to buy a TV elsewhere. She could go further and sue for damages for any difference in price in obtaining a similar TV, but which cost her more from another shop.
In considering the shop’s case, they could argue that the breach was not material and therefore as per Wade v Waldon, it is in fact Flora who is in breach of contract by withdrawing. However this would not be justified as Flora did express that time was of the essence with regard to the delivery date. Dawsons Ltd v Bonin has shown that an express intention no matter how trivial the term appears will be given effect to.
The shop could alternatively argue that they were not aware that time was of the essence, but even if unaware of their obligations the breach is still material despite their ignorance as per Blyth v Scottish Liberal Club.
Another argument could be that although the shop advised they would not be able to deliver the TV before the due date, they were not given the chance by Flora, to perhaps, somehow, to deliver on time. However, such a clear unequivocal intimation as “delivery of the TV would be a few weeks late” is clearly a breach because the other party is entitled to a present and continuing expectation that performance will be made”.
In conclusion, the shop has clearly breached a material term of the contract and in doing so, Flora has been justified in her action of accepting the repudiation, withdrawing from the contract immediately and buying a TV elsewhere.
BIBLIOGRAPHY
J.A.K. Huntley Contract: Cases and Materials 1995 W. Green/Sweet and Maxwell.
W. McBryde The Law of Contract in Scotland, 1987, W. Green.
MacMillan & Lambie Scottish Business Law, 3rd Edition, 1997, Pitman.
F.A. Marshall Scottish Cases on Contract, 2nd Edition, 1993, W. Green
D.M. Walker The Law of Contract and Related Obligations in Scotland, 3rd Edition, 1995, T & T Clark.
Willet & Odonnell Scottish Business Law, Text, Cases and Materials, 3rd Edition, 1996, Blackstone.
CITATIONS
Blyth v Scottish Liberal Club SLT 260
Dawsons Ltd v Bonin 1922 SC (HL) 156
Graham v United Turkey Red Co 1928 SC 553
Monklands District Council v Ravenstone Securities 1980 SLT (Notes) 30
Rodger v Fawdry 1950 SC 483
Wade v Waldon 1909 SC 571
White & Carter (Councils) Ltd v McGregor 1962 SC (HL) 1
Dawsons Ltd v Bonin 1922 S.C. (H.L.) 156. This case related to conditions on an insurance proposal form.
Monklands District Council v Ravenstone Securities 1980 SLT (Notes) 10
