Identifying a Repudiatory Breach of Contract

Hello and welcome to this data a webinar on identifying, repudiate tree breach of contract So again to be doing something which could be either a litigation topic, all a commercial topic, depending on whether you're drafting with me throughout this webinar or whether your litigating on reviewing a contract for that purpose, let's see what we're going to be looking at today. In our 30 minutes of we can do all of this in 30 minutes, folks will be doing really well. We're going to be looking at examining the type of obligation, then began to be thinking about the type of breach them again to look at the nature of the response, because that can often dictate the type of remedy and the way in which the breaches handled. So that's an important subject. Although it's an operational subject you can sometimes provide for that within the contract, on finally will be thinking about nature of the remedy. So let's start with what type of obligation now after to see if we can change this. You say I have a problem with my contract. Can you do something about it? And I have to say to them, watches your contract. Say what's in your contract? Always not very good contract rights, but could could you find me some liability? I think they're in some sort of default or failure, moaned. And I'd like to police that on. Unfortunately, as in life as in contracts, you gets out what you put in. And so in that sense, what we're looking at here is a type of obligation that is a condition. Unfortunately, when we draft, we may not be paying enough attention to what we're drafting so that the relationship between rights and obligations isn't as clean as we would like. Also, when we come to review a contract, we may wrongly underlines the power of the underlying obligation. Let me remind you that there are conditions there are warranties on. There are intermediate or in nominal terms on those three terms together constitutes all of the types of obligations that we can have that I'm not talking about warranty. I guarantee I'm talking about pure obligations now. I'm not talking about indemnities or performance guarantee. I'm looking at the sort of that gives us an understanding of the extent of performance required many of US draft using Cape Hyannis to put it into some sort of financial metric because we find that that is is helpful and we can work with that much better provided, of course, we can measure it. So conditions unable you terminate and they enable a breach, which could be a material breach. A warranty won't get you there. Warranty is easy to identify, but it isn't an obligation sufficient to enable termination, although question can breach of warranty. But it's a damages only recovery on intermediate or nominate turn is the one that really we need to focus on. Identifying intermediate or a nominal terms is a a preoccupation off the court of appeal when they are looking through the contract on its power to remedy, to give rights to the innocent party. So an intermediate term is not a warrant. A warrant is really easy to identify. Begin with W. But an intermediate term is not classified and dealt with treated. It's in the same way as the condition. Now it's for those intermediate or nominate type of obligations that we need repudiate, dream reach. So in a way, what we're saying is that we've dropped them so badly or they're so weak. That material breach test is looking for Mauritz looking for a more serious type of breach. So the correct test is not that of material breach but of repudiate treatment. They say we can identify these problematic obligations that are not conditions where we can use material breach. Testing will be looking at that in just a second. But let's see if we can identify some of these problematic obligations. So have a look at the the slide. There's a key there on the key issue because depending upon as I say what you plant, it gives you your remedies. If you drop something that is only a lightweight obligation, it will open the door to just a very lightweight remedy. So let's have a look. Can you spot the A nominal terms? It might be easier to spot the conditions first. So how do we drop conditions while we're gonna use some words like shall, That's a condition. Will, uh, no, I don't not using them together that must undertakes. And then you have tools like indemnity guarantee, which don't fall within this analysis because that specific tools but then representation represents. But then we have a whole collection of clothes is such as efforts, Endeavors acknowledges that SEPs every effort which fall into the annulment. You can pretty well see what they are now when we're dealing with a nominal terms. And here's an example of of a specifications was attached to a contract where the nominal terms are pretty clear from the way which is dropped is not just the verbs. It's the whole general intent and meaning of the clause that we're thinking about here. And you can see why the first paragraph office is almost nonsensical. It's a comprehensive architectural Ava knew. Well, what does that mean? What obligation is upon the supply? They're light weight verbs like May Onda should on the way that we interpret. The obligation is to cut it in half, provided that the files of transfer ready, in other words, has the purchase of the ledger before the supplier does theirs. So if we're dealing with the nominal terms, then as I say, the test is different. Let me give you an example. In the case off really listened news. I'm two dentists work together. Unfortunately, Mr Journeys, I got fed up with Mr Lee Lis because he would never pay his subs to the practice on time. So he gave him us that he gave him a sub ultimatum on Mr. Vilela Signalled this. So, Mr News, I terminated the contract. Three amount. Mr. Lee has claimed that he had been thrown out against Mr Jews I on successfully. So even though he was persistently late paying his Jews, it split the court of Appeal in the analysis of the type of obligation because it was a very lightweight document and informal contract. If you like. There wasn't a powerful shall. Pay time is all the essence. Without that, the court characterized the obligation as an in nominal terms. Andi, When it's a nominal terms, the applicable test is one that I think you can remember. It's a breach which goes to the route off the contract. Why? Because the contract dropped into set you down? We're not applying a material bridge test because there isn't a condition to breach. There's a nominal terms bridge, so it takes a repudiate tree breach formula. The two go together. I repudiate. Tree breach gives up on the contract. It's a creation of common law. You use it when the contract fails because the test is pretty serious. Going to the root of the contract means that he's never gonna pay the money and what he was gonna pay, he always was gonna pay. The check was always in the post. It's just they were any pay when he had been paid by the primary care trust pay when paid. So, Mr Jews, I couldn't say right. I'm never gonna get my money off. You be gone. You have to wait because the contract obligation was not sufficiently breached because the obligation was a dominant Had, he said, You pay eggs on why time is all the essence. We would not be having a discussion about repudiate the bridge. We would be dealing with it on a material breach faces, which is your 10 seconds late, my friend, you are in breach material breaks because I have beautifully drafted the condition. Hong Kong for shipping. Fundamental. There's a blows from the past fundamental breach. The other example I've got in the court of appeal a really obsessed with this is a Paris new homes and healthy. Now Telford homes left site for a long time in a year and then came back with money from the bank kittens. So people to try and build these houses, by which time of Paris had said, Well, I don't think you're going to finish this the three stages it's going on for a long time. Many years, this build. But Telford were very keen to try and apologize with. Sorry, we beat him, but we're going to put it right by faster performance will catch up in no time at all. But they weren't given the opportunity because I'm curious. Sent him packing again. Back came back to haunt the party who feels that they are innocent because telephone counter claimed that claims cost blames both ways. But the telephone claim is that they were not allowed to finish the contract and they were not in repudiate tree breach. Hey, they were in breach but not repudiate you. Bridge my repudiated bridge because unfortunately, the contract had been drafted using endeavors procure as possible and who definitely not conditions. So the court had to apply a fundamental repudiate tree going to the root, obliterating the contract. If a service provider is hoping to put it right, can you ever have a repudiate you because I'm trying to only if you know it's impossible. It's impossible. Let's go all your so dangerous. I'm not letting you near it. So the trying to put it right point was important because it enabled them to stay in the game. Well, by that time they've been given their marching orders. They were terminated from the contract on They were successful in counter claiming against the innocent party who had suffered miserably delay after delay after delay from the builder. But unfortunately, the innocent party was working against a nominal terms. Working with on it won't quite do as much as you want it to do. So we have to clear ways in which the analysis of breach is dealt with. Either it's a condition, war, etc. Nominate. If it's a nominal cuts, then you need to go to the root of the contract to be able to justify termination. And it doesn't mean necessarily that you couldn't get damages and hang on in there. Sure. Determination needs a repudiate tree bridge. Let me sell you this. Let me turn Quick Goal. Let me 10 quid. I will pay you back at two oclock tomorrow shop you lend me 10 quid. I turned around and I say to you, you shall never, ever get your money. Just you realize that I am never gonna pay you a penny. Not a penny? No. So that you are certain that I shall never pay you. Do you have to wait until tomorrow? Or do you know now that in anticipation I am in anticipate Tree bridge now anticipate tree breach could be repudiate tree or not, But I know now that it is not achievable. It's almost impossible to achieve, so I don't have to wait. I can begin proceedings now. So one of the most important things to know about repeating entry breach there's the UN porous test is that it's pretty realistic. Common law, invention and it can be used with conditions. Of course it can't. You didn't need it because it's much lower or serious, more difficult to prove than a standard material breach test. There's the Empress test. Look at the financial loss. How much of the intended benefit under the contract, as the injured party already received, can injured party compensated by the water damages and keep calm and carry on? Let us finish is the breach likely to be repeated. Will the guilty party resume compliance with its obligations? Has the breach fundamentally changed the value of future performance? It's quite a serious test, as I say it's commonly referred to as going to the root off the contract. Now that the news I test here it is. This was the dentists and the non payment on again. You can see that it's split the court of appeal because they were in two minds as to how to treat the significant persistent latents. A breach phenomenal term could still amount trip you attribute only if it's really serious. Yes, the Lord Wilberforce is test in the Molina my schedule a breach of the contract. Underhill accepted that it was not the most helpful formulation. He was the one who thought that there was suspicion bridge. But he was out voted by our own Floyd in Alan Old and Rick Pollard. The non payment was described as persistent statue cynical and that waas a repudiate tree bridge. And of course, the problem is that if you contrast that But if somebody is when I will pay you, the check is in the post. You can see why it is that they're trying to remedy. That's the problem, isn't now. I've included some general points on contract interpretation because we are in a particular phase of contract interpretation. We've moved to a much more literal phase, and you can see there that the case of Arnold in Britain on the capital case is the short term case off two cases which really do point too literal interpretation. Capita, in fairness, did not in the direction of contextual ism on local surrounding circumstances, as Underhill had referred to, but really, if the obligations pretty clearly drafted. But even if its draconian, then it will be interpreted as such. So you have to think very carefully about planting sufficiently getting in. And it's a draftsman charter. It dropped a kid obligation in the work. So we're looking at interpreting without any kind of measurement of the consequences. The literal meaning of the closets, any obstacles backfires doesn't actually work. Then we have to strain to contextual ism. But hopefully we can miss that out there we are a textual ism on contextual ism, so let's look at some clearly, in nomine it obligations endeavors. A jet to Blackpool Airport of course, boosting best endeavours. But still, it's a normal term. Good faith in some cases there on good faith. Good faith hasn't done very well in the 2016 round up the Court of Appeal, pushing back from an English law interpretation in the MSC case. But in the GMG case in Essex Police Authority, where the Essex Lance had the car crushing contract for the police, and instead of crushing them, they would take them home and sell money. They yeah, the police were right, they said. Yeah, this is a breach of good faith, good faith, not in the contract. But it's sort of hanging around close to behavior such as it is a mistake. So those types of lightweight in nominal terms examples there's still giving rust repudiate you reach whether it's clear, dishonest behavior in the case of good faith or a refusal to sacrifice your own commercial interest in the case of independence. So the fact that they're in nomine it doesn't necessarily mean that you won't have repudiate tribute, but it is gonna have to be clearly evidence. That's what you really need to think about. So I repudiate what type of bridge repudiate Tree Bridge is established concept under common law. It's substitutes for the primary obligations, a secondary obligation to pay money for compensation for the normal perform sex with ducks, it said. Well, what do you like? You really cannot drop topping, so we'll just steam in under common or principles and take over. The problem is that they were willing to be a repudiate tree bridge. If you plenty of evidence that they are almost at contract abandonment, I would say it's gotta be fairly serious. Here's a table comparing common with contractual termination or material bridge if you like. So repudiate tree breach is satisfying the Hong Kong for test. We'll have a look at Phoenix media When we deal with material bridge. It's serious. You got to decide what you want to do. Do you accept that their bridge? Or do you keep calm and carry on? You can affirm it. You see Well well, never mind. What do you like 11 My carry on, In which case you lose that repudiate tree bridge on. You can see that when it's a contract termination where we're not using common law. Then, of course, material riches. The test using notices could be part of it on the mechanism of perhaps remedy period is complete, so you know, you might think Well, actually, I think to bridge sounds like more trouble. It isn't because it's not such a serious test When it comes to loss, then common law gives you the full flight of damages. Contract law includes the full flight of damages and any liquidated damages as well. Now the problem with Repudiate Tree Bridge is that it excludes liquidated damages because the contract isn't helping you. You say you know you're gonna go with the common more route. It may be that you lose more than you get, but under material breach, you can have your cake and eat it. You can have liquidated damages and top up with damages. At common law. Let's look again at Repudiate Tree Bridge. There's a serious of bullet points there, which really summarizes the nature off the beast. I quite like, frustrates the commercial purpose deprives innocents part of substantially the whole of the benefit of the contract next week. If we compare that with Material bridge, it's not an established common law concept. It has no legal meaning to senator legal meaning unless it's given one in the contract. And that's where your obligation scared of meeting. Because the obligation sets the right you people often divine to breach. There's no need to do that. Pay much more attention to the obligation. Of course, if it's material breach, it will be given by the contract so it may have exclusion or limitation of liability. And then the other remedies, like liquidated damages or key performance indicators that give you a mechanism notices cure periods. That's the package you get with material bridge. It's rooted in the contract, not in common law. Let's have another look at this line on material breach. As you can see, it's established by reference to allow the circumstances, including the nature of the bridge, the consequences, the terms of duration, its effect on the benefit of the innocent party. So it's a much more holistic look which takes into consideration the contract. No, just the conduct. And finally, on material breach comes some cases which make that point. I've chosen a case which compares and contrasts the tuna that the best case on material riches case called Phoenix Medium Copper. Which 19 case where Neuberger sets out the terms I've just explained on the previous slide in across town. It's a good example off the difference between the two. I agree that materiality does not mean the breach has to be all close to repudiate. We would have to go that far. Just let me we can less conduct will still be material bridge, but to get down to repudiate your bridge. But it has to go to the root off contract. So a good comparing contrasting you could have a repudiate your breach of condition, but you need if you're policing that contract. I put a flow diagram determination just to remind us that when you're dealing with contractual mechanisms, it's sometimes as complicated as common law. If it's not slam dunk enough for common law and you're working with the mechanism in the contract that work with the mechanism in the contract. Read the contract. Don't just remember what it says, so reserve your rights. Classify the obligation. Remember, there might be a cure period before you can terminate, apply the correct test, repudiate tree or material and be careful that you I give notice or your firm we I go always stop depends what you want to do when it comes to waiver that that decision, that election is really important because the bridge analysis is no one sided. People often think it is. It's not just the non performing party. It's also the reaction of the innocent on the crystallization of the time at which you dis make that decision could be very important. In the previous cases, which were the dentist building case, he went Rome because by the time they they didn't they didn't. They did it. People do did before making a decision. I find a lot of different takes place. But if you if you are in the wrong and I do not make a decision quickly enough by the time I get around to it you said, Oh, what do we like? But we're gonna be marvelous. Hang on, Helen. We're just gonna get our skates song, we're going to improve. Then you events have overtaken the bridge. I'm no longer in a position to say, Well, I accept that on off you go. So you know, if you need to reserve writes, if you want to make that toe hesitate, all you need to make a decision while the breach is still alive and kicking and hasn't been over taken by promises of marvelous performance. Unfortunately, for those of us who are drafting the no way vehicles, which is the nothing I do should prejudices my right to know. Do whatever I need to do later work, I don't know, dropped it people, but it doesn't work. We know it doesn't work because called Pin told us it doesn't work. In the case of telling to the post office and in telling Teoh they didn't make any express reservation their rights, they paid against non performance for 11 or 12 months and then they woke up one. Then it all you're in breach we paid us for the last 11 or 12 months. And as you can see at the end of that slide, the doctrine of affirmations powerful. No window closes, not effective two of us. It's very frustrating when you drop because you can't cater for this. This is operational front line. I've done some projects with large companies throughout the world where we've tried to get what we call Amber Flash on the front line. So the people who pick up non performance first have a kind of process that they apply to keep the breach alive, not to affirm it while still managing the poor performance. It takes some doing that you have to say to you, because often non lawyers are are critical in that analysis, but the time it gets to you or I it's all over, You know, they've affirmed that they made the wrong decision. So trying to get these operational safeguards in it's pretty important. Now. I duck out a case a couple of years ago, knowledge in contract or update called the highest qualifications. Anyway, High Slope is from 1954 basically says, Look, you can't use a breach for repudiate your material breach. You can't justify termination if you haven't given them an opportunity to put it right and it was capable of being put right. The qualification is yes. If I won after is very bad, I can terminate. But the exception is that I would erected by the relevant failure hand you have only had told May is basically what the qualification means. If only you told me I could have done something about it. Now KP eyes my favorite on the reason that we're looking at repudiate your breach of KPN's is that it shouldn't need repeating actually reach because if you're adopting a service level, agreement should be a condition. But what I need to say is that on that slide you can see that I've put in the case involving KP eyes, which is cool. When they were persistently below, BT were persistently below the KP eyes. I've also in search of something called the Red Zone and problem with K P I cases is is it bad enough? I mean, it's practically paid our way out of trouble. So where do you go now on? I think it's very important to create red zone in the KP I so that you know that that's equivalent to a material or unitary bridge that is so bad that it is automatically a right to terminate you work with the m o. D. They do this three strikes and you're out in other ways. I see how KP eyes relate to termination. I'm gonna call it read. Same dropping. Now we're looking at repudiation breach in nominal terms. Shall we just see what the remedy is? The remedy depends upon the route you take, but the table that I have that is thinking about the difference between liability liquidated damages. Now remember, liquidated damages is a contract mechanism. Eso is not available under repudiate breach because repeated attributes is commonly in decay. LDS common. You get them into the contract and remember, we've given up on the contract, so you're really stuck with the compensation under general legal principles. But l these are a very good way of recovering under contract is particularly useful moment because we had new tests which loosen us up a little bit. I love words like automatically repayable on, Andi said. The L D is a valuable form of recovery. Problem is, although in general damages terms, it can be paid as well as liquidated damages. You could have predicted resigning compensation under general damages principles in repudiating breach. Technically, you can't because, as I say, it's creation of common door, and the common law doesn't allow for the contract price procedures and mechanisms. You wouldn't get post termination restraint either. You wouldn't A restrictive covenants would go repeat entry rates to, but if you're able to use material, bridge those all the new cases there. Parking eye on bond, Micah, Jesse. And they're very useful in terms of loosening up the regime and liquidated damages. So, so pretty helpful. I think if you can plant those remedies into the contract and stick to Material Bridge, our only thinks is we are getting towards the end of the webinar. Don't forget that 80 are can be determinative in deciding the route to remedy very difficult to get a repudiate tree creatures. Somebody says, Can can we come in? Use the escalation mechanisms in the contract can be helpful. Can we have a meeting? Oh, no, you're at Oh, is it? Repudiate tree preaches. They want to trigger the 80 Mount. Etiquette is Do you see what I mean? So that what they're doing is they're trying to use the 80 are mechanisms to save themselves from a repudiate rich again. That's a determining factor in the analysis of whether or not you are able to show that what you've done is sufficiently correct either a common goal or under the complex. That's just right. Remember what we've been covering today. What's the type of obligation you have to get off on the right foot If you can't analyze the contract, dropped it, then you're doomed on this. What type of bridge ship? It's a condition material. It's a nominate. Repudiate. You can always use repudiate tree. It's the last refuge of the desperate. But do not underestimate how serious going to the room to the contract is held to be by the Court of Appeal. What's the nature of the response of waiver affirmation? Acceptance of the notice to cure. Stay in Lane on What's the nature of the remedy? Damages a common law always available at common law. But if you want the contractual mechanisms like hand over post termination, liquidated damages, you need a material breach and you need a condition to be able to use. I hope I've seen some help.