Contract delays and repudiatory breach
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Contract delays and repudiatory breach
In Telford Homes (Creekside) Ltd v Ampurius Nu Homes Holdings Ltd [2013] EWCA Civ 577 the Court of Appeal appears to have moved away from its previous decision in Buckland v Bournemouth University Higher Education Corp [2012] EWCA Civ 121(that a party in breach can’t force the other to accept a breach so that the contract continues to subsist).
The Court of Appeal unanimously overturned the decision at first instance and found that the breaching party can, in certain circumstances, cure an actual breach of contract as long as the innocent party has not purported to exercise the right of repudiation. In Telford Homes the landlord had suspended work on two blocks due to difficulties in securing funding. However, by the date on which the tenant purported to terminate the contract by accepting what they believed to be a repudiatory breach the landlord had resumed work. It was held that it was immaterial that the tenant was unaware that work had restarted.
The Court held that to ascertain whether repudiation had in fact taken place, it must be considered what benefit was to be obtained by the innocent party by performance of the agreement and the effect of the breach on the innocent party. The Court listed these as:
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the party’s financial loss;
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how much of the benefit they had already received;
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whether an award for damages would be just compensation;
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whether the breach was likely to be repeated;
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whether the party in breach would resume compliance with its obligations; and
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whether the breach had fundamentally altered the value of those obligations left outstanding.
It was held that as the delay was not substantial in the context of the 999 year lease. The landlord had always intended to fulfil his obligations, the tenant had suffered very little loss and so there was no repudiatory breach.
In the current economic climate this ruling will come as some comfort to landlords and developers who entered contracts to build but now find themselves unable to fulfil their obligations by the target date.
If you wish to discuss any of the issues raised in this blog please contact David Eminton at david.eminton@parissmith.co.uk