English Law on the Discharge of Contracts

8/9/2019 English Law on the Discharge of Contracts

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BREACH AND ITS CONSEQUENCES

2. BREACH & DISCHARGE

A breach of contract is committed when a party withoutlawful excuse fails or refuses to perform what is due from him underthe contract, or performs defectively or incapacitates himself fromperforming. (Treitel, p8!"8!8#.

$awful excuses%Two examples are given below.&

Discharge: Frustrati! & Ter"i!ati! #r Breach

'ischarge by Termination for reach of )ondition (s&&(!#*+A#.

(A seller acting in breach of a condition!under a sale of goodscontract,'elivered goods not in conformity with contractualre-uirements. Terms implied by +A. The buyer lawfullyelects to reect the goods and terminate the contract/0

thereby discharging the buyer of his obligation to pay thepricebefore the buyer1s payment obligation matures.2

'ischarge by 3rustration (s 4 +A#.(!#A seller contracted to sell speci5c goods to the buyer but,

subsequent to the contract, without any fault on the seller1s orbuyer1s part, those goods perish before the ris6 passes to the

buyer.7

The contract is avoided4 by operation of law, therebydischarging the seller1s obligation to deliver the goods andalso discharging the buyer1s obligation to pay the price beforethe buyer1s payment obligation matures.8

1Based on the Sale of Goods Act (Cap 393, 1999 Rev Ed) (the SGA).2Sections 11(1), 11(2) and 61(1) (!a""ant#$) of the SGA.3%&plied condition that 'oods !ill correspond with the description!he"e the"e is a sale # desc"iption(s 13(1)). %&plied condition that the l* of 'oods !ill correspond with the samplein +alit# !he"ethe"e is a sale # sa&ple (s 1(2)(a)). %&plied condition that 'oods spplied !ill e of satisfactory

quality!he"e the selle" sells in the co"se of siness (ss 1-(2)). %&plied condition that 'oods spplieda"e reasonably fit for the buyers particular, disclosed, purpose, !he"e the selle" sells in the co"se ofsiness and the #e" "easonal# "elies on the selle"s s*ill o" /d'&ent (s1-(3)). %&plied conditionthatseller has right to sellthe 'oods (s 12(1) SGA).-Sections 11(1), 11(2), 3, 3A and 3(1) SGA. 0nless othe"!ise a'"eed, delive"# of 'oods and pa#&ent of p"ice a"e concurrent oli'ations heselle" &st e "ead# and !illin' to 'ive possession of the 'oods to the #e" in echan'e fo" the p"ice

and the #e" &st e "ead# and !illin' to pa# the p"ice in echan'e fo" possession of the 'oods (s 24SGA).6Gene"all#, nde" a cont"act fo" the sale of specific 'oods, property in the 'oodspasses f"o& selle" to#e" at sch ti&ewhen intended(s 15) and, nless othe"!ise a'"eed, risk passes to the #e"whenproperty passes(s 27). (8ote, ho!eve", the sal p"es&ption that p"ope"t# in specific 'oods passes tothe #e" at the ti&e !hen the cont"act is &ade (s14 "1 SGA).)5

his avoidance$ is effected # s 5 SGA and is sall# "e'a"ded as an instance of f"st"ation.4 0nless othe"!ise a'"eed, delive"# of 'oods and pa#&ent of p"ice a"e concurrentoli'ations (s 24SGA).

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$. CONSEQUENCES OF BREACH

Everybreach of contract gives the aggrieved " innocent partya remedy in damages (monetary compensation#, whethersubstantial or merely nominal.

Some breaches give the aggrieved party a right to elect toterminatethe contract and discharge himself from his furtherobligations under the contract.

The guilty party may not be able to enforce some of theaggrieved party1s obligations under the contract if aggrieved

party1s further obligations have been discharged bytermination.

t might be because performance of those obligations of theaggrieved party, as ordered, are conditional upon thedefaulting party1s prior performance. 9.g. the aggrieved partymay be obliged by contract to perform only after thedefaulting party1s performance/ or the aggrieved anddefaulting party1s mutual obligations might be concurrent.Therefore aggrieved party not yet obliged to perform

: Photo Production Ltd v Securicor Transport Ltd;& A) 8!4 ($ord

'iploc6#(3 7&% ?arties to a contract are free to determine for themselves what primary

obligations they will accept. 9xpressly said is better, but usually implied. @are cases% court enforces a primary obligation by decreeing speci5c

performance of it.

sually% +ubstituted"secondary obligations are implied by law. Bay relieveinnocent party from further performance of his own primary obligations.enerally common law, but sometimes statute.

3ailure to perform a primary obligation is a breach of contract. +econdaryobligation implied in law is to compensate loss sustained by innocent in

conse-uence of the breach. The primary obligations of both parties remain unchanged except%

@esult of failure has the eCect of depriving the other party of substantiallythe whole bene5t which it was the intention of the parties that he shouldobtain from the contract.

!# reach of )ondition.

Then the parties may elect to terminate.

Dhere such an election is made%

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(a# mplied in law% general secondary obligation% monetary compensation tothe other party for the loss sustained by him in conse-uence of theirnonEperformance in the future, substituting primary obligation.

(b# mplied in law a anticipatory secondary obligationF% unperformedprimary obligations of the innocent are discharged. nless modi5ed by

express words of contract. This is done in common law except forcondition, which may also be implied in statute.

$aw may also imply a fresh set of obligations to one another. (e.g.ailor"bailee#

%. AGGRIEVED 'ART()S RIGHT TO TER*INATEDhat are the circumstances under which an aggrieved party wouldhave the right to elect to terminate a contractG This is an importantissue because, despite his right to sue for damages, an aggrievedparty may sometimes 5nd that the most eCective remedy he hasagainst a defaulting party is his right to terminate/ yet one musttread very carefully. A party who purports to terminate a contractwhen he does not have the right to do so will himself be acting inbreach of contract.

: RDC Concrete v Sato Kogyo ;!==4> 0 +$@(@# 0& (?hang HA#esp ;8 I @ight to terminate in 0 situations tabulated at;&&>.

Situati!s e!tit+i!g a! i!!ce!t ,art- t ter"i!ate the c!tract atc""! +a

SITUATION

CIRCU*STANCESIN/HICHTER*INATIONIS0EGA00(1USTIFIED

I EXPRESSREFERENCETJTK9@KTTJT9@BLAT9ANDDKATD$$9LTT$9TK9LLJ)9LT?A@TMTJT9@BLAT9TK9)JLT@A)T

The contractual term breached clearly states that, in the event of certainevent or events occurring, the innocent party is entitled to terminate thecontract.

II NOE3'RESSREFERENCETJTK9@KTTJT9@BLAT9ANDDKATD$$9LTT$9TK9LLJ)9LT?A@TMTJT9@BLAT9TK9)JLT@A)T

2 ?arty in breach renouncesthe contract by clearly conveying to theinnocent party that it will not performits contractual obligationsat all.

Quaerewhether the innocent party can terminate the contract if the partyin breach deliberatelychooses to perform its part of the contract in amanner that amounts to a substantial breach.

$4a5 )onditionEwarranty approach E ?arty in breach has breached a conditionofthe contract (as opposed to a arranty#.

$465 !ong"ong #irapproach 7 a,,+- !+- a#ter c!8iti!9arra!t-

?arty in breach which has committed a breach, the c!seue!cesofwhich will 8e,ri;e the i!!ce!t ,art- # su6sta!tia++- the h+e

6e!e


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A. ?hang, @ecent 'evelopments in +ingapore )ontract $aw I The+earch for ?rinciple (!=& !8 H)$ at pp.&&E&2.

Sembcorp $arine Ltd v PPL !oldings Pte Ltd ;!=&> +)A 0 at;&7>E;&8> (+undaresh Benon )H#%

Das not Nimportant enough1 to be a condition. Lor Ndeprive the partynot in default of substantially the whole bene5t.

: $an #inancial %S& Pte Ltd v 'ong (ar" Chuan David;!==8> & +$@77 (?hang HA# esp ;&2!>I;&40> I conditions.

As stated in RDC Concrete, 0 situations for the innocent party to elect to treatthe contract as discharged as a result of the other partyOs breach.

&. where the contractual term in -uestion clearly and unambiguously statesthat, should an event or certain events occur, the innocent party would beentitled to terminate the contract (see RDC Concreteat ;#.

!. where the party in breach of contract (Fthe guilty partyF#, by its words orconduct, simply renouncesthe contract inasmuch as it clearly conveys tothe innocent party that it will not perform its contractual obligations at all(see RDC Concreteat ;#.

a. where the term breached is a conditionof the contract. nder what has beentermed the FconditionEwarranty approachF, the innocent party is entitled toterminate the contract if the term which is breached is a condition (as opposed toa warranty#% see RDC Concreteat ;. The focus here, unli6e that in the nextsituation discussed below, is not so much on the (actual# conse-uences of thebreach, but, rather, on the nature of the termbreached.

b. where the breach of a term deprives the innocent party of substantially thewhole bene5t which it was intended to obtain from the contract (see RDCConcrete at ;1.

As RDC Concrete did not elaborate on an important aspect of the conditionEwarranty approach embodied in Situation *%a&, namely, what factorsare relevantin ascertaining whether or not a given contractual term is a condition, aconsideration of this issue at this uncture is apposite.

The issue when an aggrieved party has the right to terminate hasbeen dealt with at length in the important local )ourt of Appealdecisions RDC Concrete, $an #inancialand Sports Connection.

=. CONDITION 7 /ARRANT( A''ROACH>Situati! $4a5? # RDC Concrete

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t is trite that under 9nglish contract law a breach of any condition in a contract gives the aggrieved

party the right to elect to terminate further performance ofthe contract/ and

the beach of a mere warranty gives no right to terminate,regardless of whether the consequencesof the breach were

serious.

+ection &( +ale of oods Act ()ap


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Reardon Smith Line v .ngvar !ansen/Tangen;& & D$@

5nd to be excessively technical.

9ven if a strict and technical view must be ta6en as regards the description ofunascertained future goods (e.g., commodities# as to which each detail of thedescription must be assumed to be vital.

t it ust as important to as6 whether a particular item in a description constitutesa substantial ingredient of the FidentityF of the thing sold, and only if it does totreat it as a condition (see Couchman v0 !ill;& Q 220, 22


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@. FACTORS RE0EANT TO C0ASSIFI(ING A TER* AS>CONDITION?

> Situati! $4a5? # RDC Concrete 4agai!5

Dhilst it may be clear that breach of a condition gives an aggrievedparty the right to terminate, the real diVculty lies in determining

whether the particular term which has been breached was actually acondition.

: $an #inancial %S& Pte Ltd v 'ong (ar" Chuan David;!==8> & +$@77 (?hang HA# esp ;&2!>I;&40>.

The conditionEwarranty approach E relevant factors in ascertainingwhether or not a given contractual term is a FconditionF

(a# ntroduction

As RDC Concrete did not elaborate on an important aspect of theconditionEwarranty approach embodied in Situation *%a&, namely, whatfactors are relevant in ascertaining whether or not a given contractualterm is a condition, a consideration of this issue at this uncture isapposite.

t is important to note at the outset that there is no magical formula(comprising a certain 5xed number of factors or criteria# that would enablea court to ascertain whether or not a given contractual term is a condition.This is not unexpected, given the very nature of the in-uiry itself (whichwould include a countless number of permutations and variations,depending on the respective factual matrices and, more importantly, theintentions of the respective contracting parties themselves#. Kowever, as

is inherent within the very nature of common law development, certainfactors that might (depending, as ust mentioned, on the precise factualmatrix concerned# assistthe court in this regard have been developed.

At bottom, the focus is on ascertaining the intention of the contractingparties themselves by construing the actual contract itself %including thecontractual term concerned& in the light of the surrounding circumstancesas a hole(see the classic exposition on this point by owen $H (as he thenwas# in the oftEcited 9nglish )ourt of Appeal decision of (entson v Taylor,Sons 6 Co %1o 7& ;&8 ! P !40 at !8.

(b# The 5rst factor% Dhere a statuteclassi5es a speci5c contractual term

as a FconditionF

+tatutory provision classi5es a speci5c contractual term as a FconditionF,then that term will, of course, be a condition. The paradigm model is the+ale of oods Act (which embodies conditionEwarranty approach#.

(c# The second factor% Dhere the contractual term itself expressly statesthat it is a FconditionF

The second factor is an ostensibly obvious one% Dhere the contractualterm itself e8pressly statesthat it is a FconditionF, then that term wouldgenerally be held by this court to be a condition.

Case la e8ception9 express use of the word FconditionF might (onoccasion, at least# be insuVcient to render that term a condition in law.

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L Schuler -5 v 'ic"man $achine Tool Sales Ltd ;& A) !2 (FSchulerF#K$ decision% Although the word FconditionF was expressly utilised, it wasused in lay sense.

Baority1 reasoning in Schulerwas preoccupied with the consequences ofthe breach of contract, rather than a focus on intention of the parties Nthe

nature of the term1. ndeed, there is a reference by $ord Qilbrandon to theFgrotes-ue conse-uencesF (idat !4!# of holding the term breached to be aFconditionF in the strict legal sense of the word.

Baority of the Kouse in Schulerwere applying the !ong"ong #irapproachinstead and, more importantly, relates to the actual nature andconsequences of the breach instead#. ndeed, there is a very powerfuldissenting udgment by $ord Dilberforce (see Schuler at !7!E!7#, whowarned against rewriting, in eCect, what was the clear intention of thecontracting parties that the term concerned be a FconditionF in the strictlegal sense of the word (in accordance with the substance and spirit of theconditionEwarranty approach under +ituation (a##.

ndeed, it might well have been the fact situation in Schuler whichprompted the maority of the Kouse to adopt what was, in substance andeCect, the !ong"ong #ir approach instead. The intention of the parties(pursuant to the conditionEwarranty approach# ought to ta6e precedencefor, as we pointed out in RDC Concrete(;&2!> supra# at ;&==>, although the!ong"ong #ir approach is conventionally associated with a sense offairness (in that it allows termination of a contract only if the nature andconse-uences of the breach are so serious as to deprive the innocent partyof substantially the whole of the bene5t of the contract which it wasintended to obtain from the contract#, it is equallytrue that a sense offairness (albeit from a diCerent perspective# also features when theconditionEwarranty approach is applied inasmuch as it is fair to hold the

contracting parties to their original bargain.

De also observed in RDC Concrete(especially at ;&&=># that general Kouseof $ords decisions after Schuler in fact supported the approach that weadopted in that case (in particular, our stance that the conditionEwarrantyapproach in +ituation (a# should ta6e precedence over the !ong"ong #irapproach in +ituation (b# in so far as it ought to be ascertained, 5rst,whether or not the contractual term concerned is a condition#% see, forexample, (unge Corporation, 1e .or" v Trada8 E8port S-, Panama ;&& D$@ 4&& (F(ungeF# and Torvald Klaveness -:S v -rni $aritimeCorporation ;&@eliance on a prior precedent is convenient. ut must still analyse andunderstand the principle in the precedent. Practice Statement %;udicialPrecedent&;&


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The fourth factor centres on the importance placed on certainty andpredictabilityin the context of mercantiletransactions. )ase law suggeststhat courts are more li6ely to classify contractual terms as conditions inthis particular context, especially where they relate to timing (see, forexample, (ungeand The $ihalis -ngelos#.

(f# +ummary of the relevant factors under the conditionEwarrantyapproach

n the 5nal analysis, the focus is on ascertaining the intention of thecontracting parties themselves by construing the actual contract itself%including the contractual term concerned& in the light of the surroundingcircumstances as a hole (see also ;&7&> above#.

(S61 Ltd %(2+& v $icado Shipping Ltd %$alta& (The Sea ).$.). 0!&, ;!==&> & $loyd1s $aw @ep 0& at ;0!>%

N)onclusion. The conclusion to be drawn from these cases is that aterm of a contract will be held to be a condition%

(i# if it is expressly so provided by statute/

(ii# if it has been so categorised as the result of previous udicialdecision (although it has been said that some of the decisionson this matter are excessively technical and are open to reEexamination by the Kouse of $ords#/

(iii# if it is so designated in the contract or if the conse-uencesof its breach, that is, the right of the innocent party to treathimself as discharged, are provided for expressly in the

contract/ or (iv# if the nature of the contract or the subectEmatter or the

circumstances of the case lead to the conclusion that the partiesmust, by necessary implication, have intended that the innocentparty would be discharged from further performance of hisobligations in the event that the term was not fully and preciselycomplied with.

Jtherwise a term of a contract will be considered to be an intermediateterm. 3ailure to perform such a term will ordinarily entitle the party notin default to treat himself as discharged only if the eCect of breach ofthe term deprives him of substantially the whole bene5t which it was

intended that he should obtain from the contract1.

C+assic!8iti!? >arra!t-? 6- C!structi! #C!tract

(entsen v Taylor;&8 ! P !40 at !8=E!8& (owen $H#%Tells you that court construes as warranty or condition. Sery diVcultto tell

diVcult to decide as a matter of construction whether a representationbecomes a condition or a warranty.

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As6% what extent the accuracy of the statement would be li6ely toaCect the substance and foundation of the adventure which thecontract is intended to carry outG

!# eCect of a breach of such a condition would be on the substance andfoundation of the adventure (not ust on the breach#

+ection &&(!# +A%

$abels are inconclusive.

(!# Darranty or )ondition, depends in each case on the construction of thecontract/ and a stipulation may be a condition, though called a warranty in thecontract.

C+assic!8iti!? >arra!t-? 6- StatuteBost convenient

+ection 7&( +A%7&(. n this Act, unless the context otherwise re-uires W FwarrantyF means anagreement with reference to goods which are the subect of a contract of sale, butcollateral to the main purpose of such contract, the breach of which gives rise to aclaim for damages, but not to a right to reect the goods and treat the contract asrepudiated..

Bere warranties implied into sale of goods contracts by ss &!(!#E(2# +A%Lo encumbranceE goods is notLo right to reect the contract.

&!(!#. n a contract of sale, other than one to which subsection (#

applies, there is also an implied warranty that W(a# no encumbrance(b# the buyer will enoy -uiet possession of the goods except so faras it may be disturbed by the owner or other person entitled to thebene5t of any charge or encumbrance so disclosed or 6nown.

&!(#. This subsection applies to a contract of sale in the case of whichthere appears from the contract or is to be inferred from its circumstancesan intention that the seller should transfer only such title as he or a thirdperson may have.&!(0#. nder (# All encumbrances 6nown by the seller must be made6nown to buyer&!(2#. nder (# there is also an implied warranty that none of thefollowing will disturb the buyer1s -uiet possession of the goods, namely W

(a# the seller/(b# the third party who the seller is selling for/(c# ?eople claiming through a and b under a charge orencumbrance disclosed or 6nown to the buyer before the contract is

made.

)onditions implied into sale of goods contracts by +A%section &!( (seller1s right to sell#,section &( (goods will correspond with description#,section &0(!# (goods of satisfactory -uality#,section &0(# (goods reasonably 5t for buyer1s particular, disclosed,purpose#,

section &2(!# (bul6 of goods will correspond with sample in -uality#.

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n general, more important term is classi5ed as )ondition, lessimportant is warranty.+ection &(% even if breach is -uite slight, can still brea6 thecontract.A innocent party can choose to dismiss it as a warranty?arties may vary implied terms.

f consumer, you can+ &2 A% $imits buyer1s right to reect goods in nonEconsumercontracts where breach is so slight that it would be unreasonable forthe buyer to reect

+ection &&+A%&&(. The buyer may waive the conditions owed by the seller, may treat it as awarranty.&&(!#. )ondition or warranty depends in each case on the construction of thecontract/ and a stipulation may be a condition, though called a warranty in the

contract.

+ection &2A +A, restricting nonEconsumer buyer1s right tounreasonably reect goods for slight breach%

&2A(. Dhere in the case of a contract of sale W(a# the buyer would, apart from this subsection, have the right toreect goods by reason of a breach on the part of the seller of acondition implied by section &, &0 or &2/ but(b# the breach is so slight that it would be unreasonable for thebuyer to reect them,

then, if the buyer does not deal as consumer, the breach is not to betreated as a breach of condition but may be treated as a breach ofwarranty.

&2A(!#. This section applies unless a contrary intention appears in, or is tobe implied from, the contract.&2A(#. t is for the seller to show that a breach fell within subsection ((b#.

:Cehave 1020 v0 (remer !andelsgesellschaft m0b0!0 (The >!ansa1ord?# ;& P.. 00 (BQ 48! " 448, 3 24=E24 (@os6ill $H# I@eected citrus pulp pellets/ shipment to be made in goodcondition notcondition.+ection && +A does notcompel courts to treat all terms in a sale ofgoods contract as either a condition or warranty. ?reservation of

common law by section 7! +A. )ourts may hold some terms in asale of goods contract to be intermediate terms.

C+assic!8iti!? 6- 1u8icia+ 'rece8e!tDhere particular type of clause has been classi5ed as condition,then classify it as condition.

(unge Corporation 1e .or" v Trada8 E8port S-;& & D$@ 4&&($ord Dilberforce# (BQ480 " 48=, 3247#

3ollowing the rain and 3eed Trade Association $td.Os (A3TA# standard form ofcontract && daysO notice of probable readiness of vessel(s#F

Lotice was given only &= days. Keld, that clause 4 was a condition of the contract.

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+ellers entitled to terminate and claim damages even though did not go deprivesellers of substantially whole bene5t.

$ord Dilberforce% 3allacy in attempting to apply this ;!ong Kong #ir> analysis to ati"e c+ause such as the present in a "erca!ti+e c!tract, which is totallydiCerent in character.

ssues%

Dhat1s the importance both parties attached towards this breach.

n the absence of expressed agreement, what conse-uence ought to beattached to it having regard to the contract as a whole.

?roblem%

9xposes parties to an argument whether this delay would have left time forthe seller to provide the goods (& day ! days daysG#.

'iVcult for supplier to 6now when he can provide. @educes certainty, increases number of arbitrations.

'amages become extremely diVcult to -uantify.

am clear that the submission is unacceptable in law. KongQong 3ir approachgives way to things speci5ed as conditions.

X t remains true, as $ord @os6ill has pointed out in Cehave 1020 v0 (remer!andelsgesellschaft m0b0!0 %The !ansa 1ord&;& P 00, that the courtsshould not be too ready to interpret contractual clauses as conditions. And have myself commended, and continue to commend, the greater

Yexibility in the law of contracts to which !ong Kong #irpoints the way(Reardon Smith Line Ltd0 v0 .ngvar !ansen/Tangen;& & D$@


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)harterer entitled to rely on breach of condition, despite havinggiven invalid reason.

Begaw $H% 3irst, it tends towards certainty in the law. Jne of the essentialelements of law is some measure of uniformity. Jne of the importantelements of the law is predictability. At any rate in commercial law, there

are obvious and substantial advantages in having, where possible, a 5rmand de5nite rule for a particular class of legal relationship% for example, ashere, the legal categorisation of a particular, de5nable type of contractualclause in common use. t is surely much better, both for shipowners andcharterers (and, incidentally, for their advisers#, when a contractualobligation of this nature is under consideration, and still more when theyare faced with the necessity for an urgent decision as to the eCects of asuspected breach of it, to be able to say categorically% Ff a breach isproved, then the charterer can put an end to the contract,F rather thanthat they should be left to ponder whether or not the courts would beli6ely, in the particular case, when the evidence has been heard, to decidethat in the particular circumstances the breach was or was not such as Fto

go to the root of the contract.F Dhere ustice does not re-uire greaterYexibility, there is everything to be said for, and nothing against, a degreeof rigidity in legal principle.

+ection &= +A%&=(. nless a diCerent intention appears from the terms of the contract,stipulations as to time of payment are not of the essence of a contract ofsale.(!# Dhether any other stipulation as to time is or is not of the essence ofthe contract depends on the terms of the contract.(# n a contract of sale, month prima facie means calendar month.

!artley v !ymans;& Q 042 (Bc)ardie H#%

Low, if time for delivery be of the essence of the contract, as in thepresent case, it follows that a vendor who has failed to deliver within thestipulated period cannotprima faciecall upon the buyer to accept deliveryafter that period has expired. Ke has himself failed to ful5l the bargain andthe buyer can plead the sellerOs default and assert that he was not readyand willing to carry out his contract. That this is so seems clear. t is, ta6eit, the essential uristic result when time is of the essence of the contract.... n the present case, it is to be noted, the plaintiC relies on thedefendantOs letters, and he pleads those letters in the statement of claimas evidence of and as constituting an agreement for an extension of timefor delivery, or a waiver of the contract time...

Low, if the present be a case of waiver should hold that the defendanthad undoubtedly waived the condition that the goods should be deliveredby Lovember &2, inasmuch as long after that date he demanded andreceived deliveries under the contract....n my view the facts and documents here clearly call for one or moreuristic bases upon which to support the plaintiCOs claim. shall hold% (&.#That here the defendant waived his right to insist that the contract periodterminated on Lovember &2, &


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(!.# hold that (in so far as estoppel diCers from waiver# the defendant isestopped from saying that the period for delivery expired on Lovember &2,& & +$@77 (?hang HA# esp ;&72>I;&4=>.

?hang HA% (c# The second factor% Dhere the contractual term itself expresslystates that it is a FconditionF

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The second factor is an ostensibly obvious one% Dhere the contractualterm itself e8pressly statesthat it is a FconditionF, then that term wouldgenerally be held by this court to be a condition.

!oever, we have added the word FostensiblyF because, even in whatappear to be very clearEcut situations, there is case law that suggests that

the express use of the word FconditionF might (on occasion, at least# beinsuVcient to render that term a condition in law. n this regard, the Kouseof $ords decision of L Schuler -5 v 'ic"man $achine Tool Sales Ltd;&A) !2 (FSchulerF# comes readily to mind. n that case, the maority of theKouse held that, although the word FconditionF was expressly utilised, thatword was being utilised not as a term of legal art, but, rather, in a laysense.

At 5rst blush, the approach adopted by the maority in Schuler is not awholly untenable one. After all, it is true that the same word (here,FconditionF# can ta6e on diCerent meanings depending on the context inwhich it is used. Dith respect, however, a close analysis of the reasoning of

the maority in Schuler demonstrates a preoccupation with theconsequencesof the breach of contract in that case, rather than a focus (inaccordance with the conditionEwarranty approach in +ituation (a## on thenature of the term breached. ndeed, there is a reference by $ordQilbrandon (who was one of the maority udges# to the Fgrotes-ueconse-uencesF (idat !4!# of holding the term breached to be a FconditionFin the strict legal sense of the word.

t is our view that the maority of the Kouse in Schulerwere, in substanceand e@ect, applying the !ong"ong #irapproach instead (which, it will berecalled, falls under +ituation (b# and, more importantly, relates to theactual nature and consequences of the breachinstead#. ndeed, there is avery powerful (and, in our view, persuasive# dissenting udgment by $ord

Dilberforce (see Schuler at !7!E!7#, who warned against rewriting, ineCect, what was the clear intention of the contracting parties that the termconcerned be a FconditionF in the strict legal sense of the word (inaccordance with the substance and spirit of the conditionEwarrantyapproach under +ituation (a##.

ndeed, it might well have been the fact situation in Schuler whichprompted the maority of the Kouse to adopt what was, in substance andeCect, the !ong"ong #ir approach instead. Dith respect, however, theintention of the parties (pursuant to the conditionEwarranty approach#ought to ta6e precedence for, as we pointed out in RDC Concrete (;&2!>supra# at ;&==>, although the !ong"ong #ir approach is conventionallyassociated with a sense of fairness (in that it allows termination of acontract only if the nature and conse-uences of the breach are so seriousas to deprive the innocent party of substantially the whole of the bene5t ofthe contract which it was intended to obtain from the contract#, it isequallytrue that a sense of fairness (albeit from a diCerent perspective#alsofeatures when the conditionEwarranty approach is applied inasmuchas it is fair to hold the contracting parties to their original bargain.

De also observed in RDC Concrete(especially at ;&&=># that general Kouseof $ords decisions after Schuler in fact supported the approach that weadopted in that case (in particular, our stance that the conditionEwarrantyapproach in +ituation (a# should ta6e precedence over the !ong"ong #irapproach in +ituation (b# in so far as it ought to be ascertained, 5rst,

whether or not the contractual term concerned is a condition#% see, forexample, (unge Corporation, 1e .or" v Trada8 E8port S-, Panama;&

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& D$@ 4&& (F(ungeF# and Torvald Klaveness -:S v -rni $aritimeCorporation ;&INTER*EDIATE? INNO*INATE? TER* A''ROACH>Situati! $465? # RDC Concrete

The conditionEwarranty approach promotes certainty in that theresult Yowing from breach is clear. Jnce there is a breach ofcondition, it follows that the aggrieved party has the right toterminate, despite the conse-uences of breach being slight/li6ewise, breaching a mere warranty gives no right to terminatedespite the conse-uences being serious. The sometimes harshresults of classifying a breached term under the conditionEwarrantyapproach has led to the recognition of intermediate orinnominate terms.

The breach of an intermediate or innominate term does not

automatically give an aggrieved party the right to terminate/whether such right arises depends on the seriousness of theconse-uences. n short, where an intermediate term has beenbreached, the aggrieved party has a right to terminate only if suchbreach deprives the aggrieved party of substantially the wholebene5t which it was the intention of the parties as expressed in thecontract that he should obtain as the consideration for performingthose underta6ings (!ong Kong #ir, 'iploc6 $H#.

: !ong Kong #ir Shipping Co Ltd v Kaasa"i Kisen Kaisha ;& !P !7,;& ! All 9@ !24 (BQ 442 " 44=, 3 274# ('iploc6 $H# I

seaworthiness under !0Emth charterparty, re-uiring vessel to bein every way 5tted for ordinary cargo service/ seaworthiness ofvessel notcondition.

:Cehave 1020 v0 (remer !andelsgesellschaft m0b0!0 (The >!ansa1ord?# ;& P.. 00 (BQ 48! " 448, 3 24=E24 (@os6ill $H# I@eected citrus pulp pellets/ shipment to be made in goodcondition notcondition.

: #ederal Commerce and 1avigation v $olena -lpha +nc (The1anfri#;&E;24>.

Cousins Scott 'illiam v The Royal (an" of Scotland plc ;!=&=> +K)4 at ;7&E72>

+teven )hong H)% n determining whether the breach had deprived the

defendant of the substantial bene5t of the @edundancy Agreement,counsel for the defendant accepted that the in-uiry is focussed not on thepotential loss of the breach but the actual loss, if any. The parties have to

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wait and see what the nature and conse-uences of the breach actuallyare. +ee RDC Concrete Pte Ltdat ;.t is indisputable that the plaintiC did not substantially breach the@edundancy Agreement. Although he initially breached the con5dentialityobligation in forwarding the two emails, he subse-uently deleted them onthe same day when he was instructed to do so by the defendant. There is

no dispute that the breach did not cause any loss whatsoever to thedefendant. Thereafter the plaintiC, at the re-uest of the defendant,reinforced his con5dentiality obligation by executing a +tatutory'eclaration.Jn the evidence, 5nd that the plaintiC1s breach did not deprive thedefendant of substantially the whole bene5t of the @edundancyAgreement. Jn the contrary, 5nd that the defendant did in fact receivesubstantially the whole bene5t of the @edundancy Agreement.n the circumstances, 5nd that while the plaintiC did breach hiscon5dentiality obligation, the breach was not repudiatory in nature so as toentitle the defendant to terminate the @edundancy Agreement. +uch abreach merely entitles the defendant to a claim in damages. Kowever as

the defendant has not suCered any loss arising from the forwarding of thetwo emails, will only award nominal damages to the defendant onaccount of this breach. Accordingly, 5nd that the sum of Z022,=82. shall be paid by the ?ublisher to the Driter, by ban6 order or inche-ue, in +ingapore 'ollars.&=.! The Driter or its representative shall have the right to inspect all boo6s,records and other documents of the ?ublisher related to the )ompositions, at theplace of business of the ?ublisher, during usual business hours, and uponreasonable notice/ all costs of such inspection shall be paid by the Driter/provided, however, that if more than ten (&=[# percent of diCerence between therendered statements by the ?ublisher and the result of ;the> said inspection hasoccurred, all costs (except travelling and living costs# of such inspection shall bepaid by the ?ublisher. These audit costs may never exceed an amount e-ual tothe amount of underpayment.)lause &! (+uspension U Termination#%

+n the event that the Publisher fails to account and ma"e payment hereunder orfails to perform any obligations required hereunder and in the event that suchfailure is not cured ithin thirty %*A& days after ritten notice has been served on

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the Publisher, or in the event that the ?ublisher becomes inactive, ceases doingmusic publishing business or ... ;goes> into compulsory li-uidation or ban6ruptcy,then and in any such events the Driter, in addition to such other rights orremedies which it may have at law or otherwise under this agreement, may electto cancel or terminate this agreement without preudice to any rights or claims itmay have, and then all rightBs in and to the CompositionBs 000 shall revert to the

'riter and the Publisher may not thereafter e8ercise any rights hereunder.This is a clear example of 9xpress Termination )lause.

?hang HA% Kence, there was nothing to show that true and completestatements of account were in fact provided by BUB. There was, as far asthe evidence on record shows, a clear breach of cl &= of the ?rincipalAgreement, which entitled )hua to terminate the agreement pursuant to cl&! thereof and to recover the rights in the )ompositions. )lause &! of the?rincipal Agreement is, in fact, a clear example of an express terminationclause which falls under F+ituation &F as outlined by this court in RDCConcrete Pte Ltd v Sato Kogyo %S& Pte Ltd;!==4> 0 +$@(@# 0& at ;(reference may also be made to the recent decisions of this court in Sports

Connection Pte Ltd v Deuter Sports 5mb!;!== +$@(@# 88 at ;2&>E;27>and #u .uan #oodstu@ $anufacturer Pte Ltd v $ethodist 'elfare Services;!== +$@(@# E;7>#.

Rice v 5reat .armouth (orough CouncilThe Times !7"4"!===, !===Destlaw 8!E;!8> (BQ 48< " 482# (Kale $H#%

The most signi5cant provision is contained in )lause !, headedNTermination1%

N. f the contractor% !.!.& commits a breach of any of its obligationsunder the )ontract/ X the )ouncil may, without preudice to anyaccrued rights or remedies under the )ontract, terminate the)ontractorOs employment under the )ontract by notice in writinghaving immediate eCect1.

There is no commercial common sense in reading this literally. @efused to believethis is what parties meant.

Nf the )ontractorOs employment is terminated as provided in)ondition X !.! and is not reinstated, the )ouncil shall% !..&cease to be under any obligation to ma6e further payment until thecosts, loss and"or damage resulting from or arising out of thetermination of the )ontractorOs employment shall have beencalculated and provided such calculation shows a sum or sums due

to the )ontractorX1

X 3or the reasons which the udge gave, the notion that this term wouldentitle the council to terminate a contract such as this at any time for anybreach of any term Yies in the face of commercial common sense.Kowever, Br Bann also argues that the udge should 5rst have consideredwhich terms of the contract had been bro6en and whether they were suchimportant terms as to give rise to a right to terminate. Ke identi5ed a coreobligation in each contract, either in the exact terms of clause 7.& orsomething very similar to it%

N'uring the contract period the contractor shall provide the +ervice

in a proper s6ilful and wor6manli6e manner, to the contractstandard and to the entire satisfaction of the authorised oVcer.1

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The diVculty with that argument is that this is a classic example of aninnominate term% one which can be bro6en in so many diCerent ways andwith such varying conse-uences that the parties cannot be ta6en to haveintended that any breach should entitle the innocent party to terminatethe whole contract.

#u .uan #oodstu@ v $ethodist 'elfare Services;!== +$@ @eferred to @ice. +ingapore ta6ing diCerent path.@eferred to a speci5c provision, and the provision was really aboutcompliance to +ingapore establishments.'ispute was about foreign wor6ers.3ully reYected the parties1 intentions.Jr% as a charitable organisation, they wanted to 6eep to laws of+ingapore.

?hang HA% n our view, this case fell s-uarely within F+ituation &F in RDCConcrete Pte Ltd v Sato Kogyo %S& Pte Ltd ;!==4> 0 +$@(@# 0& (FRDC

ConcreteF# at ;, ie, a situation where the contract clearly andunambiguously states that, should a certain event or events occur, theinnocent party will be entitled to terminate the contract. )lause .! of theAgreement expressly stipulated that the respondent would have the rightto immediately terminate Fshould the ;appellant> breach any item under;cl> ... !.4F. +ince there was, as we had earlier found, a breach of cl !.4.! ofthe Agreement, the right to terminate the Agreement immediately arosepursuant to cl .!. ...nli"ethe approach adopted in Rice, we gave full eCect to the terminationclause concerned (here, cl .! read with cl !.4.!# as it in fact reYected theparties1 intentions. ndeed, if a termination clause is clearlydrafted, itsliteral language ought to accurately re ... !.4# accurately re


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intentions of the parties as embodied within the wording of the terminationclause in -uestion.

BQ (2thed, !=&!# at pp.4

.armouth>. The 5rst is that, in deciding whether or not there hasbeen a repudiatory breach of contract, it is permissible to ta6e acumulative approach and have regard to the range of breachescommitted by the party in breach. The second and much moreimportant point relates to the interpretation of clause !.!.&adopted by the )ourt of Appeal. t held that it gave the )ouncil theright to terminate the contract only on the occurrence of arepudiatory breach of contract. There are two substantial obectionsto this interpretation. 3irst, the )ouncil had a right to terminateunder the general law on the occurrence of a repudiatory breach sowhy insert a clause into the contract if its only eCect was toreplicate a right that already existed under general lawG +econdly,

the )ourt of Appeal failed to give suVcient weight to the word Nany1in the clause (Nif the contractor commits a breach of any of itsobligations under the contract, the )ouncil may ... terminate thecontractor1s employment1#. The response of the )ourt of Appeal tothis obection was that the notion that this term entitled the )ouncilto terminate the contract at any time for any breach of any termYew in the face of commercial common sense. t is diVcult to resistthe conclusion that the )ourt of Appeal allowed its perception ofNcommercial common sense1 to override the ordinary meaning of thewords in the contract (contrast Looney v Tragura (eheer (2;!=&&>9DK) &!2 ()h#, ;!=&&> All 9@ ('# &4 (3eb#, where it was held thatthe defendants had an unfettered right to terminate provided thatthey paid the relevant termination fee#. 3urther, the eCect of doingso was to expose the )ouncil to a claim for substantial damages forwrongful termination.This decision gives rise to signi5cant drafting diVculties. Terminationclauses are regularly used in practice and this decision caused adegree of consternation among practitioners. s it possible to draft aclause which gives a right to terminate the contract when thebreach is not repudiatory at common lawG ... A party who wishes tohave the bene5t of a wider right to terminate might be betteradvised to stipulate that the right to terminate arises in the event ofNany breach (whether or not that breach is repudiatory#1. 5reat.armouth is an important case because it demonstrates theimportance of drafting issues and the important role that

interpretation of clauses can play in the development of the law.Hudges can wield signi5cant power through the process ofinterpretation. t is diVcult to resist the conclusion of the )ourt ofAppeal of +ingapore in #u .uan #oodstu@... that the )ourt of Appealin 5reat .armouthNread down1 the scope of the termination clausein order to control its operation. The legitimacy of this restrictiveapproach to interpretation is open to -uestion.

>0ss # Bargai!? Da"ages

:Sports Connection v Deuter Sports 5mb!;!== +$@(@# 88 esp

;22>'iCerence between Termination clause vs reach

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Termination clause% Lo compensationeach of condition% )ompensation

?hang HA% t should, however, be noted, at this uncture, that whilst+ituation & entails (in substance# the same legal eCect as a condition(pursuant to the conditionEwarranty approach#, this is onlywith regard to

the terminationof the contract. Kowever, this does not necessarilymeanthat, from a remedialperspective, the innocent party is alsoentitled to thefullmeasure of damages ifthere has, in fact, been no breach which wouldhave entitled it to terminate the contract at common law (see the 9nglish)ourt of Appeal decision of #inancings Ltd v (aldoc" ;& ! P &=0(F#inancingsF# as well as the Kigh )ourt of Australia decision of Shevill vThe (uilders Licensing (oard(&


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express contractual provision which entitled it to terminate if the hirerfailed to pay any instalment within &= days of the due date, repossessedthe truc6 and eventually sold it for \&0=. $ord 'enning B@ succinctlystated the position thus (at &&0#%

N+uVce it to say that in this case there was no repudiation ;under

common law>, but only nonEpayment, for which the plaintiCsthemselves, under an express stipulation in that behalf, terminatedthe agreement. n that situation they can only recover the unpaidinstalments with interest.1

n #inancings, the hirer had at the date on which the owners exercisedtheir option to terminate the contract said nothing to indicate hisunwillingness or his inability to pay either these or any future instalments.n the absence of any express contractual provision to the contrary, thenonEpayment of the two instalments would not of themselves go to theroot of the contract or evince an intention on the part of the hirer no longerto be bound by the contract (ie, the facts do not fall within +ituations ! or

(b# identi5ed in RDC Concrete(;!7> supra##. Thus, the owners only had aright to terminate under express contractual provisions/ no right toterminate had arisen under the common law. n the result, the ownerswere only entitled to recover damages for unperformed obligations whichhad accrued at the date of the termination.

The second scenario is where the party who had terminated pursuant toexpress contractual provisions had a concurrent rightto do so under thecommon law, and as such, he would be entitled, in principle, to recoverloss of bargain damages. As Lombard 1orth Central Plc v (utterorth(FLombardF# illustrates, the nonEpayment there breached a condition ofprompt payment. The defendant leased e-uipment from the plaintiC underan agreement that provided for the payment of rentals at -uarterly

intervals on a speci5ed day. )lause !(a# of the contract stipulated thatpunctuality in ma6ing payments Fis of the essenceF. )lause 2(a#additionally provided for a right to terminate in the event of default inpunctual payment by the lessee. The court found that because of cl 2(a#,the lesseeOs delay in ma6ing payment was a repudiatory breach. As aresult, the ownerOs right to terminate had arisen under both expresscontractual provisions and the common law. The court thus allowed theclaimant to recover loss of bargain damages. n Lombard, the inclusion ofcl 2(a# had led to the conclusion that cl !(a# was a condition, and becausea condition had been breached, the innocent party was entitled toterminate under the common law, and thus could recover loss of bargaindamages. As noted (at ;!> above#, there was no repudiatory breach in#inancingsto give rise to a right to terminate under the common law whichwould have allowed the court to reach the same conclusion as that inLombard.

Chitty on Contractat para !!E=0< helpfully summarised the legal positionas follows% NThus, where a contracting party terminates furtherperformance of the contract pursuant to a term of the contract, and thebreach which has caused it to exercise that power is not a repudiatorybreach, the party exercising the right to terminate may only be entitled torecover damages in respect of the loss which it has suCered at the date oftermination and not for loss of bargain damages. Dhere, however, thebreach is also repudiatory and that repudiatory breach has been accepted,loss of bargain damages can be recovered by accepting the contractual

right to do so or by accepting the other partyOs repudiation of the contract1.

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Kence, whether the defendant could recover loss of bargain damagesdepended on the existence of a concurrent right to terminate under thecommon law.

$a8 $edia #F LLC v 1imbus $edia Pte Ltd;!=&=> ! +$@ 744, ;!=&=>

+K) = at ;2>Andrew Ang H% )urrently, where a contract is terminated pursuant to anexpress provision alone, ie, under +ituation &, damages for loss of bargainmay be recoverable only if there is a concurrent repudiatory breach undercommon law% see $ord LichollsO speech in Lombard (;&> supra# at 207which was reaVrmed by the )ourt of Appeal in Sports Connectionat ;22>(see also Tan 'ee #ong v Denieru Tatsu #6( !oldings %S& Pte Ltd ;!==+K) !E;2>#. Jn the other hand, without a repudiatory breachunder common law, the innocent party may not claim for damages arisingafter the contractOs termination (see generally #inancings (;&> supra##,although it will still be entitled to recover damages in respect of the loss itsuCered at or before the date of termination. ut if +ituation & is

substantially the same as +ituation (a#, then this bifurcated principlewould ma6e no sense. t is arti5cial to as6 what is the nature of a termunder common law where there is within the contract an express provisionstating that the breach of that term would give the innocent party the rightto terminate. This -uandary was also recognised in rian @ Jpes6inOsarticle, F'amages for reach of )ontract Terminated under 9xpress TermsF;&


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GStoc)nia 5dynia v 5earbul" !oldings;!== 9D)A )iv 42, ;!== D$@ 744 esp ;00E02> (BooreEic6 $H# I )ontract for sale of ship/seller committing common law repudiatory breach by nonEdelivery.)ontract contained express termination clause. ?urchaser1s lettergave notice to terminate invo6ing express termination clause.

Lotice eCective to terminate both for common law repudiation andunder express termination clause/ purchaser entitled to damages forloss of bargain.

BooreEic6 $H% t must be borne in mind that all that is re-uired foracceptance of a repudiation at common law is for the inured party tocommunicate clearly and une-uivocally his intention to treat the contractas discharged% see Sitol +A v Lorelf $td ;& & $loyd1s @ep 2


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5eys v Societe 5enerale, London (ranch;!=&> & A) 2!/ ;!=&!>Q+) 7 ($ord +umption dissenting#.(9mployment contract/ repudiatory breach/ not automaticallyterminated upon breach/ terminated when innocent party elects toaccept repudiation#.

2itol S- v 1orelf Ltd;& 9D)A )iv &40# might possibly survive termination ifintended by the parties to do so. (BQ 4


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There is an important similarity between the two principles, election ande-uitable estoppel, in that each re-uires an une-uivocal representation,perhaps because each may involve a loss, permanent or temporary, of therelevant partyOs rights. ut there are important diCerences as well. n thecontext of a contract, the principle of election applies when a state ofaCairs comes into existence in which one party becomes entitled to

exercise a right, and has to choose whether to exercise the right or not. Kiselection has generally to be an informed choice, made with facts givingrise to the right. Kis election once made is 5nal/ it is not dependent uponreliance on it by the other party. Jn the other hand, e-uitable estoppelre-uires an une-uivocal representation by one party that he will not insistupon his legal rights against the other party, and such reliance by therepresentee as will render it ine-uitable for the representor to go bac6 onhis representation. Lo -uestion arises of any particular 6nowledge on thepart of the representor, and the estoppel may be suspensory only.3urthermore, the representation itself is diCerent in character in the twocases. The party ma6ing his election is communicating his choice whetheror not to exercise a right which has become available to him. The party toan e-uitable estoppel is representing that he will not in future enforce his

legal rights. Kis representation is therefore in the nature of a promisewhich, though unsupported by consideration, can have legalconse-uences/ hence it is sometimes referred to as promissory estoppel.

There may be an exception to the rule that an election to aVrm,once exercised, is irrevocable. n cases of continuing repudiatoryconduct by the defaulting party% The aggrieved party who haselected to aVrm the contract after the 5rst breach may be able totreat the continuing nonEperformance as a freshact of repudiation(;ohnson v -gne;& A) 74/ Safehaven v Springbo"(& !$loyd1s @ep 07, ;!==!> 9D)A )iv 88< at ;84>.

@ix $H% n my udgment, there is of course a middle ground betweenacceptance of repudiation and aVrmation of the contract, and that is theperiod when the innocent party is ma6ing up his mind what to do. f hedoes nothing for too long, there may come a time when the law will treathim as having aVrmed. f he maintains the contract in being for the

moment, while reserving his right to treat it as repudiated if his contractpartner persists in his repudiation, then he has not yet elected. As long as

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the contract remains alive, the innocent party runs the ris6 that a merelyanticipatory repudiatory breach, a thing writ in water until acceptance,can be overta6en by another event which preudices the innocent party1srights under the contract I such as frustration or even his own breach. Kealso runs the ris6, if that is the right word, that the party in repudiation willresume performance of the contract and thus end any continuing right in

the innocent party to elect to accept the former repudiation as terminatingthe contract.

-llen v Robles;& 0 +$@0= +K) &08, Sinodh )oomaraswamy H at ;&!!>E;&!0>. +eealso ;0>E;0!> on clari5cation of the concepts of waiver, electionand aVrmation.

Jnce a contract has been terminated by the aggrieved party1selection, it cannot be revived even by the parties1 agreement.nstead, such a fresh agreement may constitute a new contract.

4ri8 Capital Ltd v Personal Representative%s& of the Estate of LimChor Pee;!== +K) !=&, ;!== 0 +$@(@# &=7! esp ;!8E=>

Hudith ?ra6ash H% t is clear from the texts and also accords withcommonsense that once a contract has been terminated, it comes to anend and is not capable of being revived, even by the partiesO agreement.nstead, when there is such an agreement, what the parties create is a newcontract. n this case, the $ease ended on 4 Huly !==2 when the plaintiCexercised its right of election and chose to terminate the $ease rather thanto allow it to continue to run. Kaving done this, the plaintiC was thenentitled to exercise all its remedies accruing under the $ease. The plaintiCchose not to do this. nstead, at $)?Os re-uest and on the basis that certain

new terms were agreed to, it entered into a new contract in respect of thelease of the )opiers. The plaintiC may have thought that it was revivingthe $ease but this was not the legal conse-uence of its action.

)an one party terminate, where both parties have been in breachG

-lliance Concrete Singapore v Comfort Resources ;!== 0 +$@(@#7=! at ;00E07>

?hang HA% There appears to be a dearth of case law authority with regardto the situation where both parties are in breach of contract and onepartysee6s to terminatethe contract. ... The applicable legal principles were, infact, considered by this court in ;et !olding Ltd v Cooper Cameron

%Singapore& Pte Ltd ;!==7> +$@(@# 47< (F;et !oldingF#, as follows (at ;E;


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N


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$an #inancial %S& Pte Ltd v 'ong (ar" Chuan David ;!==8> & +$@77 at ;&22>

?hang HA% As stated in RDC Concrete, there are four situations whichentitle the innocent party (here, the appellant# to elect to treat thecontract as discharged as a result of the other partyOs (here, the

respondentOs# breach. X The second(F+ituation !F# is where the party inbreach of contract (Fthe guilty partyF#, by its words or conduct, simplyrenouncesthe contract inasmuch as it clearly conveys to the innocentparty that it will not perform its contractual obligations at all (see RDCConcreteat ;#.

A!it- 6etee! Dctri!e # >A!tici,atr- Breach?a!8 RDC Concrete>Situati! 2? 4Re!u!ciati! Re,u8iati!5

@enunciation (also called repudiation# occurs when one party bywords or conduct evinces an intention not to perform part or all ofthe contract. @enunciation at or after the time of performance

amounts to actual breach or impossibility. @enunciation before thetime 5xed for performance is itself a breach (although labelled asanticipatory breach, suggesting that the breach is to come#, andif suVciently serious, entitles the aggrieved party to terminate thecontract at onceand claim damages for the loss of the contract.()henEDishart 2&0"028#

*ea!i!g # >Re!u!ciati!? >Re,u8iati!?

: San +nternational v Keppel Engineering;&Qarthigesu HA% The law on repudiatory breach or renunciation can besummarised as follows% A renunciation of contract occurs when one partyby words or conduct evinces an intention not to perform or expresslydeclares that he is or will be unable to perform his obligations in somematerial respect. +hort of an express refusal or declaration the test is toascertain hether the action or actions of the party in default are such asto lead a reasonable person to conclude that he no longer intends to bebound by its provisions. The party in default may intend in fact to ful5l thecontract but may be determined to do so only in a manner substantiallyinconsistent with his obligations, or may refuse to perform the contractunless the other party complies with certain conditions not re-uired by its

terms% Chitty on Contractsvol & at para !0E=&7..

Econ Piling v 5TE Construction;!== +K) !& at ;=>Hudith ?ra6ash H% The conduct of T9 was such as to permit 9con towal6 away from the HS Agreement. This holding is based on the legalprinciple which was recognised in RDC Concrete X and that is thatwhere a party, by his words or conduct, simply renounces his contractinasmuch as he clearly conveys to the other party to the contract thathe will not perform his contractual obligations at all, that the otherparty is entitled to terminate the contract. 3urther recognition of theprinciple can be found in the following passage of Chittyon )ontracts,vol & (+weet U Baxwell, =th 9d, !==8# (at !0E=&8#% NX An absoluterefusal by one party to perform his side of the contract will entitle theother party to treat himself as discharged, as will also a clear andunambiguous assertion by one party that he will be unable to perform

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#rost v Knight(&84&E4!# $@ 4 9x &&&

The defendant promised to marry the plaintiC so soon as his (defendantOs# fathershould die (as the father opposed such marriage#. 'uring the fatherOs lifetime thedefendant refused absolutely to marry the plaintiC. Keld, the plaintiC could sueeven though the defendantOs father being still alive. The principle of !ochster v0

De la Tourwas applicable to the case of such a promise to marry, and that abreach of contract had been committed on which the plaintiC could sue.

)oc6burn )H% The law with reference to a contract to be performed at afuture time, where the party bound to performance announces prior to thetime his intention not to perform it, as established by the cases of!ochster v0 De la Tourand The Danube and (lac" Sea Co0 v0 Jenoson theone hand, and-very v0 (oden, Reid v0 !os"ins, and (aric" v0 (ubaonthe other, may be thus stated. The promisee, if he pleases, may treat thenotice of intention as inoperative, and await the time when the contract isto be executed, and then hold the other party responsible for all theconse-uences of nonEperformance% but in that case he 6eeps the contract

alive for the bene5t of the other party as well as his own/ he remainssubect to all his own obligations and liabilities under it, and enables theother party not only to complete the contract, if so advised,notwithstanding his previous repudiation of it, but also to ta6e advantageof any supervening circumstance which would ustify him in declining tocomplete it.

Jn the other hand, the promisee may, if he thin6s proper, treat therepudiation of the other party as a wrongful putting an end to the contract,and may at once bring his action as on a breach of it/ and in such action hewill be entitled to such damages as would have arisen from the nonEperformance of the contract at the appointed time, subect, however, toabatement in respect of any circumstances which may have aCorded him

the means of mitigating his loss.

The considerations on which the decision in !ochster v0 De la Tour isfounded are that the announcement of the contracting party of hisintention not to ful5l the contract amounts to a breach, and that it is forthe common bene5t of both parties that the contract shall be ta6en to bebro6en as to all its incidents, including nonEperformance at the appointedtime/ as by an action being brought at once, and the damages conse-uenton nonEperformance being assessed at the earliest moment, many of theinurious eCects of such nonEperformance may possibly be averted ormitigated.

t is true, as is pointed out by the $ord )hief aron, in his udgment in thiscase, that there can be no actual breach of a contract by reason of nonEperformance so long as the time for performance has not yet arrived. ut,on the other hand, there isWand the decision in !ochster v0 De la Tourproceeds on that assumptionWa breach of the contract when the promisorrepudiates it and declares he will no longer be bound by it. The promiseehas an inchoate right to the performance of the bargain, which becomescomplete when the time for performance has arrived. n the mean time hehas a right to have the contract 6ept open as a subsisting and eCectivecontract. ts unimpaired and unimpeached eVcacy may be essential to hisinterests. Kis rights ac-uired under it may be dealt with by him in variousways for his bene5t and advantage. Jf all such advantage the repudiationof the contract by the other party, and the announcement that it never will

be ful5lled, must of course deprive him. t is therefore -uite right to holdthat such an announcement amounts to a violation of the contract in

31


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Des the 8ctri!e # a!tici,atr- 6reach a,,+- t eecute8c!tracts

This -uestion was considered (obiter dicta# by elinda Ang H in The

>STJ $umbai?;!=&0> +$@ &&&7/ ;!=&0> +K) &!!, ;20> I ;40>

I!ca,acitati!g O!ese+# #r" 'er#r"i!g

A person may brea6 a contract by incapacitating himself fromperforming it. Thus a seller commits a breach of contract for the saleof a speci5c thing if he sells it to a third party ((odell v Parsons(&8=8# &= 9ast 2


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The central -uestion to be as6ed in cases of this type is whether,loo6ing at all the circumstances obectively, that is from theperspective of the of a reasonable man in the position of theinnocent party, the contractEbrea6er has clearly shown an intentionto abandon and altogether refuse to perform the contract(Eminence Property Developments Ltd v !eaney;!=&=> 9D)A )iv

&&78, ;!=&&> ! All 9@ ()omm# !!#. The answer given by a court tothat -uestion will depend very heavily on the facts of the individualcase. n some cases the court has concluded that there is arepudiatory breach (see, for example, #ederal Commerce 61avigation v $olena -lpha %The M1anfri, while in others the courthas concluded that there was no repudiatory breach (see, forexample, 'oodar +nvestment v 'impey Construction#. The motiveof the contractEbrea6er may be ta6en into account if it reYectssomething of which the innocent party was, or a reasonable personin his position would have been, aware and throws light on the waythe alleged repudiatory act would be viewed by such a reasonableperson.

(BQ, 2th

ed, !=&! at p.4

Eminence Property Developments Ltd v !eaney ;!=&=> 9D)A )iv

&&78, ;!=&&> ! All 9@ ()omm# !! (BQ, 7thed at p.48


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interest, 5nancial or otherwise, in performing the contract ratherthan claiming damages.

!ochster v De la Tour (&82# ! 9l U l 748, &&8 9@

$P/(ilt Pte Ltd v 4ey 'idarto;&


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a ship was chartered to carry cargo from Jdessa. The master wastold before the end of lay days that no cargo was available, but heremained in port and urged the charteres to perform. The contractwas then frustrated by outbrea6 of the )rimean Dar. (3 280#

#ercometal S-RL v $editerranean Shipping Co S-(The Simona#;& D$@ !== esp !&! (3 280#

$ord Ac6ner% Dhen A wrongfully repudiates his contractual obligations inanticipation of the time for their performance, he presents the innocentparty . with two choices. Ke may either aVrm the contract by treating itas still in force or he may treat it as 5nally and conclusively discharged.There is no third choice, as a sort of via media, to aVrm the contract andyet to be absolved from tendering further performance unless and until Agives reasonable notice that he is once again able and willing to perform.+uch a choice would negate the contract being 6ept alive for the bene5t ofboth parties and would deny the party who unsuccessfully sought torescind, the right to ta6e advantage of any supervening circumstance

which would ustify him in declining to complete.

Towards the conclusion of his able address, Br. oyd sought to raise whatwas essentially a new point, neither argued before the arbitrators, $eggattH., nor the )ourt of Appeal. Ke submitted that the charterersO conduct hadinduced or caused the owners to abstain from having the ship ready priorto the cancellation date. Jf course, it is always open to A, who has refusedto accept Os repudiation of the contract, and thereby 6ept the contractalive, to contend that in relation to a particular right or obligation underthe contract, . is estopped from contending that he, , is entitled toexercise that right or that he, A, has remained bound by that obligation. f. represents to A that he no longer intends to exercise that right or

re-uires that obligation to be ful5lled by A and A acts upon thatrepresentation, then clearly . cannot be heard thereafter to say that he isentitled to exercise that right or that A is in breach of contract by notful5lling that obligation. f, in relation to this option to cancel, the ownershad been able to establish that the charterers had represented that theyno longer re-uired the vessel to arrive on time because they had already5xed the Leo Tornadoand in reliance upon that representation, the ownershad given notice of readiness only after the cancellation date, then thecharterers would have been estopped from contending they were entitledto cancel the charterparty. There is, however, no 5nding of any suchrepresentationX.

. C0AI*S B( THE DEA!"#$ING 'ART(

)an the defaulting party, notwithstanding his breach, enforce theaggrieved party1s obligations under the contractG

4A5 E!tire C!tract O6+igati!

Cutter v Poell(&4


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The defendant at Hamaica delivered to )utter (the intestate# a notestating% Ten days after the ship Novernor ?arry,1 myself master,arrives at $iverpool, promise to pay to Br. T. )utter the sum ofthirty guineas, provided he proceeds, continues and does his duty assecond mate in the said ship from hence to the port of $iverpool.

)utter boarded the ship overnor ?arry and sailed from Qingston,Hamaica, in August &4


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action for the salary as each month arose, and which, when oncevested, was not subect to be lost or divested by the plaintiCOsdesertion.

?olloc6 ). .% De are of opinion that the plaintiC is entitled to a

verdict for 2=l. on the 5rst count, on the ground that the contractbetween the parties was for a monthly payment, that eight of thosemonths had elapsed and only seven been paid for. n thedefendantOs letter to the plaintiC, he uses the expression, Mour payto be at the rate of 2=l. per month. Dhat would have been theeCect of these words had they been un-uali5ed and unexplained byanything subse-uent, it is unnecessary to say, for in the plaintiCOsanswer he uses the expression, pay of 2=l. per month. f this doesnot diCer from the defendantOs letter, it shews what it means/ if itdoes, it is a new or counter oCer by the plaintiC, and being acceptedby the defendant, is the basis of the contract between them. tsterms, therefore, supersede or explain those of the previous letter ofthe defendant. There per month means each month, ormonthly/ and gives a cause of action as each month accrues,which, once vested, is not subse-uently lost or divested by theplaintiCOs desertion or abandonment of his contract. The words areplain/ and no mercantile man would doubt what was meant. utfurther, if this meaning is not given, the result would be, that hadthe plaintiC died, or the voyage failed at the last moment, nothingwould be payable by the defendant, because, according to hiscontention, the performance of the entire wor6 contracted for was a

condition precedent to the right to receive anything. This cannothave been intended.

Tong -i" %#ar East& Ltd v Eastern $inerals 6 Trading %=NON& Ltd ;& B$H !! (Dinslow H#.

The contract stipulated that the plaintiCs should Nbe able1 to supplythe defendants with a minimum of 2,=== tons monthly. The plaintiCswere also responsible for providing their own transport such aslorries etc. and the cost of all fuel was to be borne by them. Allmachinery operating at the mine would be provided by the

defendants. The plaintiCs were to be paid Z7.2= per ton foroperations at the mine and Z4.2= per ton for transportationX

The plaintiCs claim a sum of Z72,!78.20 being the balance still owedto them by the defendants as their agreed remuneration for wor6and labour carried out at the mine until August &


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and also counterEclaim for loss of pro5ts and penalties incurred bythem as a result of the plaintiCs] breach, totalling nearly Z8==,===.

XBr KoCman, for the defendants, submitted that the contract wasan entire or lump sum contract. Ke said that on the authority of

Sumpter v !edges;&8 & P 74the plaintiCs] claim wasmisconceived and that they could not recover from the defendantsin respect of wor6 done as upon aquantum meruitfor they hadabandoned the contract without producing 2,=== tons of manganeseore per month as promised, there being no evidence of a freshcontract to pay for the same. XAs against this view, Br Kilbornesubmitted that counsel for the defendants had misconceived thelaw. n his submission this was a divisible contract and not an entireor lump sum contract and that the plaintiCs should succeed on aquantum meruit. X

The distinction between FentireF and FdivisibleF contracts is set outclearly in vol 8 of!alsburys Las of England, rd 9dn, at page &77as follows%

3There is a distinction to be dran beteen contracts hich aredivisible and those hich are indivisible, and the distinction is of

particular importance in regard to questions of illegality andquestions of payment0 Contracts are indivisible here theconsideration is one and entire, or here it is stated or can begathered by necessary inference that no consideration is to pass

from one party till the hole of the obligations of the other partyhave been completed but here no such intention can be gathered,and the contract resolves itself into a number of considerations for anumber of acts, as in the case of periodical payments for a numberof services hich do not form one complete hole, the contract isdivisible0

+n an indivisible or entire contract the right to payment does notarise until the contract has been completely performed but if therehas been substantial performance a claim ill be alloed subHect toany counterclaim or set/o@ for omissions or defects in e8ecution0

+f a contract is divisible, for e8ample here a seller of goods agreesto deliver by instalments, the right to payment arises as each partof the contract is performed and here there has been partial

performance a proportionate payment may be recovered0

- claim can also be made here it can be inferred from thecircumstances that there is a fresh agreement beteen the partiesthat payment shall be made for or" already done or goods alreadysupplied under the original contracts, as for e8ample here a buyer

of goods accepts less than the stipulated quantity03

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The following passage fromPolloc" on Contracts, &th 9dn, at page!=< throws further light on this distinction% 3- contract hich can befullled only as a hole, so that failure in any part is failure in thehole, is said to be entire0 - contract of hich the performance canbe separated, so that failure in one part a@ects the parties rights

as to that part only, is said to be divisible03

Applying these principles to the contract in -uestion it would, in myopinion, be wrong to hold that it must necessarily be construed tobe an entire or lump sum contract. Dhat are the attributes of a lumpsum contract which it hasG There is nothing in the contract tosuggest how long it was intended to last or that payment would onlybe made on completion of any underta6ing as a whole or after theexpiration of any stipulated period of time. y its very terms it is acontract containing mutually concurrent and dependent promisesthe performance of the promise of each party being conditionalupon the promise of the other being performed at the same time. nshort, on the provision of ade-uate machinery etc., by thedefendants, the plaintiCs undertoo6 to be able to produce 2,===tons per month to be remunerated at the agreed rates per tonpresumably until such time as the ore was exhausted or untiltermination otherwise. $oo6ed at in this way it does not seem to methat this is a contract which was intended to be ful5lled only as awhole. t possesses more of the characteristics of a divisible contractto be ful5lled in parts. The distinction is not always easy to draw butit is diVcult to appreciate in what the FwholenessF of the contract

lies.

This is clearly not a contract in which the consideration is one andentire nor is it so stated therein, nor can it be gathered by necessaryinference that no consideration is to pass from one party till thewhole of the obligations of the other party have been ful5lled. Thecontract seems to resolve itself into a number of considerations fora number of acts to be paid for at the agreed rates per ton. Xf thedefendants had meant otherwise they would have said Fyou mustsupply a minimum of 2,=== tons monthlyF and also made clearprovisions as to what would happen on failure. have therefore

come to the conclusion that this is a divisible contract and that theplaintiCs must be paid for the tonnages of ore actually producedand"or transported to the stoc6pile.

4C5 Su6sta!ti;e 'er#r"a!ce

(uilding 6 Estates v -$ Connor;& B$H &4 (Dhyatt )H#.

The plaintiCs claimed from the defendant a sum of Z0,8= being theamount of the purchase money which remained unpaid in respect of

a house which the plaintiCs built for the defendant pursuant to anagreement whereby the defendant agreed to buy a plot of land

-7


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together with the house to be erected thereon for a lump sum ofZ!&,0

sum claimed and furthermore counterclaimed for the sum ofZ&!,=7 which she said must be expended on the house to ma6e itcorrespond with the speci5cation.

The 5rst -uestion to be decided is whether the plaintiCs areentitled to sue for the balance of the purchase price, assuming forthe purpose of argument, the house has not been built exactlyaccording to speci5cation. The answer to this -uestion dependsupon the construction of the agreement entered intoX

t is an agreement for the sale of a plot of land together with thehouse to be erected thereon for a lump sum of Z!&,0

substantially performed his side of the contract may sue on thecontract for a lump sum but, of course, remains liable in damagesfor his partial failure to ful5l his contractual obligations. The doctrineof substantial performance, as it has been called, is usually tracedbac6 to $ord Bans5eld]s udgment in(oone v Eyre&!7 9@ &7=. thas been reEaVrmed in many cases since that date, and ta6e asthe most recent and authoritative statement of the law on thismatter the udgment of $ord Hustice 'enning (as he then was# in!oenig v +saacs;& ! All 9@ &47 where the learned $ord Husticeexpressed himself thus %

30000 the rst question is hether, on the true construction of thecontract, entire performance as a condition precedent to payment0+t as a lump sum contract, but that does not mean that entire

performance as a condition precedent to payment0 'hen acontract provides for a specic sum to be paid on completion ofspecied or", the courts lean against a construction of thecontract hich ould deprive the contractor of any payment at allsimply because there are some defects or omissions0 The promiseto complete the or" is, therefore, construed as a term of thecontract, but not as a condition0 +t is not every breach of that term

hich absolves the employer from his promise to pay the price, butonly a breach hich goes to the root of the contract, such as an

-1


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abandonment of the or" hen it is only half done0 nless thebreach does go to the root of the matter, the employer cannot resist

payment of the price0 !e must pay it and bring a cross/claim for thedefects and omissions, or alternatively, set them up in diminution ofthe price0 The measure is the amount hich the or" is orth less

by reason of the defects and omissions and is usually calculated bythe cost of ma"ing them good30

There is, in my opinion, no doubt at all that the agreement in thiscase, upon its true construction, falls within the class of contractwhich $ord Hustice 'enning had in mind in this passage. t is anagreement providing for the erection of a house and the sale of theplot of land on which it stands for a lump sum and as such it is, ifnot identical, at least very similar, in character to the contract in thecase of! Da"in 6 Co Ltd v Lee;& & Q 277 which $ord Hustice+omervell (as he then was# stated in!oenig v +saacs, supra, was adecision in which the true position on the construction of this classof contract was reEaVrmed. Accordingly in my view the plaintiCs areentitled to sue the defendant for the contract price, on the basis, ofcourse, that they can show that the wor6 which they have doneconstitutes substantial compliance with the contract. Jn this pointthe evidence is, in my udgment, overwhelmingly in favour of theplaintiCs. The defects and omissions of which complaint is made bythe defendant relate to a number of miscellaneous items many ofthem trivial or of only minor importance, and having listened to theevidence of the parties and their expert witnesses, and further,

having had the advantage of inspecting the house myself, am in nodoubt that the defects and omissions which have been proved,whether ta6en singly or in the aggregate, are not such as to entitlethe defendant to say that the plaintiCs have not substantiallyperformed their promise under this contract. As Br Qoren, anarchitect called by the plaintiC put it% Fn its class, in this pricecategory, this house is a perfectly sound dwelling.F agree with BrQoren]s view and would only add that if had felt any hesitation inaccepting it, it would have been dispelled by my inspection of thehouse which left me with the impression that this dwelling,notwithstanding certain defects which will deal with presently, is a

sound and satisfactory structure. t follows, therefore, that thedefendant is liable to pay to the plaintiCs the balance of the contractprice, namely, Z0,8=, subect, of course, to the deduction of suchsum as may be found due on the counterclaim..

:!oenig v +saacs;& ! All 9@ &47 (3 27=# (defectiveboo6shelf#

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: (olton v $ahadeva;& & D$@ &==< (3 27# (installation ofcentral heating system#.

N)ases such as !oenig v +saacsare sometimes explained on theground that the claimant had substantially performed an entire

contract. t is submitted that the explanation is unsatisfactory sinceit is based on the error that contracts, as opposed to particularobligationsare, can be entire. The basis of !oenig v +saacsis thatthe builder even if he was under an entire obligation as to the-uantity of the wor6 to be done, was under no such obligation as toits -uality. 'efects of -uality therefore fell to be considered underthe general re-uirement of substantial failure. To say that anobligation is entire meansthat it must be completely performedbefore payment becomes due. +uppose a contract is made to carrygoods from Belbourne to $ondon and the freight is payable ondelivery in $ondon. f the goods are carried only to +outhampton,the carrier may have substantially performed/ but he is notentitled to the freight. n relation to entire obligations, there is noscope for any doctrine of substantial performance.1 (Treitel 8!4 "8!!#

4D5 Restituti!ar- C+ai"

Acce,ta!ce # ,artia+ ,er#r"a!ce: Quantum meruit4ser;ices5 Quantum %ale&at4g8s5

A defaulting party who renders incomplete performance of an entireobligation may nevertheless claim remuneration where theaggrieved party has freely accepted such partial performance orotherwise waived the need for complete performance. n mostcases, such a claim will arise on a quantum meruitfor a reasonablesum for services rendered or wor6 done by partial performance. utthis happens only if the aggrieved party has the option whether toaccept or refuse the partial performance. Jriginally, the basis of thisliability was said to be that accaeptance of partial performanceimplies a fresh agreement to pay for the wor6 done or goodssupplied, but such implication can be 5ctional. t is better to regard

the payment obligation as resting on unust enrichment. (Anson027#.

Sumpter v !edges;&8 & P 74 (3 22


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The defendant thereupon 5nished the buildings on his own account,using for that purpose certain building materials which the plaintiChad left on the ground. The udge gave udgment for the plaintiC forthe value of the materials so used, but allowed him nothing inrespect of the wor6 which he had done upon the buildings.

A$ +mith $H% n this case the plaintiC, a builder, entered into acontract to build two houses and stables on the defendantOs land fora lump sum. Dhen the buildings were still in an un5nished state theplaintiC informed the defendant that he had no money, and was notgoing on with the wor6 any more. The learned udge has found as afact that he abandoned the contract. nder such circumstances,what is a building owner to doG Ke cannot 6eep the buildings on hisland in an un5nished state for ever. The law is that, where there is acontract to do wor6 for a lump sum, until the wor6 is completed theprice of it cannot be recovered. Therefore the plaintiC could notrecover on the original contract. t is suggested however that theplaintiC was entitled to recover for the wor6 he did on a -uantummeruit. ut, in order that that may be so, there must be evidence ofa fresh contract to pay for the wor6 already done.

)ollins $H% thin6 the case is really concluded by the 5nding of thelearned udge to the eCect that the plaintiC had abandoned thecontract. X There are cases in which, though the plaintiC hasabandoned the performance of a contract, it is possible for him toraise the inference of a new contract to pay for the wor6 done on a

-uantum meruit from the defendantOs having ta6en the bene5t ofthat wor6, but, in order that that may be done, the circumstancesmust be such as to give an option to the defendant to ta6e or not tota6e the bene5t of the wor6 done. t is only where the circumstancesare such as to give that option that there is any evidence on whichto ground the inference of a new contract. X The mere fact that adefendant is in possession of what he cannot help 6eeping, or evenhas done wor6 upon it, aCords no ground for such an inference. Keis not bound to 6eep un5nished a building which in an incompletestate would be a nuisance on his land. am therefore of opinion thatthe plaintiC was not entitled to recover for the wor6 which he had

done.

#oo Song $ee v !o Kiau Seng;!=&&> +)A 02 at ;&8>

)hao HA% )laims based on quantum meruitcan be found uponcontract or restitution. The former relates to cases where there is acontract for the supply of services though this same contract lac6s aterm on the -uantum of remuneration, and the latter relate

Documents

English Law on the Discharge of Contracts