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Heyman v Darwins Limited: HL 1942

An arbitration clause will survive a repudiatory breach: ‘I agree with the Lord Chancellor in thinking that the true ground of the decision in Jureidini v National British and Irish Millers Insurance Co Ltd was the narrowness of the field of submission and the fact that no dispute had arisen on the only point submitted to arbitration.’
If one party to a contract repudiates it and that repudiation is accepted, then ‘By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded.’ The primary obligations under the contract may come to an end, but secondary obligations then arise, among them being the obligation to compensate the innocent party. The original rights may not then be enforced. But a consequential right arises in the innocent party to obtain a remedy from the party who repudiated the contract for his failure in performance.
Lord Porter said that in differentiating between disputes ‘arising under’ and ‘arising out of’ the agreement, the former should be given a narrower meaning.
As to the right to rescind, he said: ‘The three sets of circumstances giving rise to a discharge of contract are tabulated by Anson as: (1) renunciation by a party of his liabilities under it; (2) impossibility created by his own act; and (3) total or partial failure of performance. In the case of the first two, the renunciation may occur or impossibility be created either before or at the time for performance. In the case of the third, it can occur only at the time or during the course of performance.’
References: [1942] AC 356, [1942] 1 All ER 337
Judges: Viscount Simon LC, Lord Wright, Lord Macmillan, Lord Russell of Killowen, Lord Porter
Jurisdiction: England and Wales
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Last Update: 27 November 2020; Ref: scu.193384 br>

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