Contractor not bound to accept Renunciation
Mr McGregor contracted with the appellants for them to display advertisements for three years on litter bins. The contract was made on his behalf by an employee, without specific authority. On the day it was made, he sought to cancel the contract.
Held: Where a party is in renunciatory breach of contract, the other party is not bound to accept the breach and sue for damages, but may perform its own obligations under the contract and claim what is due under the contract. A party is not bound to enforce its contractual rights in a reasonable way.
Lord Reid: ‘The general rule cannot be in doubt. It was settled in Scotland at least as early as 1848 and it has been authoritatively stated time and again in both Scotland and in England. If one party to a contract repudiates it in the sense of making it clear to the other party that he refuses or will refuse to carry out his part of the contract, the other party, the innocent party, has an option. He may accept that repudiation and sue for damages for breach of contract, whether or not the time for performance has come; or he may if he chooses disregard or refuse to accept it and then the contract remains in full effect.’
As an exception: ‘It may well be that, if it can be shown that a person has no legitimate interest financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself. If a party has no interest to enforce a stipulation, he cannot in general enforce it: so it it might be said that, if a party has no interest to insist on a particular remedy, he ought not to insist on it. And just as party is not allowed to enforce a penalty, so he ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him.’ Here the contract-breaker could not take advantage of the exception: ‘Here the respondent did not set out to prove that the appellants have no legitimate interest in completing the contract and claiming the contract price rather than claiming damages; there is nothing in the findings of fact to support such a case and it seems improbable that any such case could have been proved. It is, in my judgment, impossible to say that the appellants should be deprived of their right to claim the contract price merely because the benefit to them as against claiming damages and reletting their advertising space, might be small in comparison with the loss to the respondent . . .’
Lord Keith said that absent express agreement, an action for the price arises only in two cases. First where the property in the goods has passed to the buyer, and: ‘The only other case is where parties have contracted for payment on a day certain, irrespective of delivery or the passing of property. This is a clear case of a contractual debt unconditioned by any question of performance by the other party.’
Lord Reid, Lord Morton of Henryton, Lord Tucker, Lord Keith of Avonholm, Lord Hodson
[1961] UKHL 5, [1962] AC 413, [1961] UKHL 7, 962 SLT 9, [1961] 3 All ER 1178, [1962] 2 WLR 17, 1962 SC (HL) 1
Bailii, Bailii
Sale of Goods Act 1893
Scotland
Citing:
Adopted – Grahame v Magistrates of Kirkcaldy HL 1882
Lord Watson said: ‘It appears to me that a superior Court, having equitable jurisdiction, must also have a discretion, in certain exceptional cases, to withhold from parties applying for it that remedy to which, in ordinary circumstances, they would . .
Cited by:
Cited – Stocznia Gdanska S A v Latvian Shipping Co and Others HL 22-Jan-1998
The parties had contracted to design, build, complete and deliver ships. The contract was rescinded after a part performance.
Held: It remained appropriate for payment to be made for the work already done in the design and construction stages: . .
Cited – Broadway Investments Hackney Ltd v Grant CA 20-Dec-2006
The respondent had taken a tenancy of premises from the local authority. The ground floor was for use as a shop, and the first was residential. He had previously taken a licence and had refurbished the premises. The authority sold the freehold to . .
Cited – Reichman and Another v Beveridge CA 13-Dec-2006
The defendants were tenants of the claimant. They vacated the premises and stopped paying the rent. The claimant sought payment of the arrears of rent. The defendants said that the claimants should have taken steps to reduce their damages by seeking . .
Cited – Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council CA 25-May-1990
The club had enjoyed a concession from the council to operate pleasure flights from the airport operated by the council. They were invited to bid for a new concession subject to strict tender rules. They submitted the highest bid on time, but the . .
Cited – Reichman and Another v Beveridge CA 13-Dec-2006
The defendants were tenants of the claimant. They vacated the premises and stopped paying the rent. The claimant sought payment of the arrears of rent. The defendants said that the claimants should have taken steps to reduce their damages by seeking . .
Cited – Societe Generale, London Branch v Geys SC 19-Dec-2012
The claimant’s employment by the bank had been terminated. The parties disputed the sums due, and the date of the termination of the contract. The court was asked ‘Does a repudiation of a contract of employment by the employer which takes the form . .
Cited – Cavendish Square Holding Bv v Talal El Makdessi; ParkingEye Ltd v Beavis SC 4-Nov-2015
The court reconsidered the law relating to penalty clauses in contracts. The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raised the issue in relation to two clauses in a substantial commercial contract. The second appeal, . .
Lists of cited by and citing cases may be incomplete.
Contract
Leading Case
Updated: 09 November 2021; Ref: scu.238536