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Claiming damages upon an anticipatory breach: why should an acceptance be necessary?

Published online by Cambridge University Press:  02 January 2018

Qiao Liu
Qiao Liu*
Affiliation:
University of the West of England, Bristol
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Abstract

This article is an attempt to defend the English rule that an anticipatory breach does not automatically give rise to a right of action for damages unless and until it is ‘accepted’. The article first explores the major arguments for and against the rule and finds that the rule is justifiable on the ground of finality and consistency and that none of its objections are persuasive enough to overturn the rule. The article further observes that the rule must be qualified in two important respects in order to retain its rational force. However, the above rule is currently stated by the courts to the effect that an anticipatory breach is not per se a breach and is only ‘converted’ into a breach when it is ‘accepted’. It is proposed that this statement is historically unwarranted and contradicts sound logic and should thus be discarded.

Type
Research Article
Information
Legal Studies , Volume 25 , Issue 4 , November 2005 , pp. 559 - 577
Copyright
Copyright © Society of Legal Scholars 2005

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References

1. For convenience, both one party's renunciation of the contract and his disablement from performing the contract will be referred to as ‘repudiation’ of the contract in this article.

2. In this article, an ‘anticipatory breach’ is treated as equivalent to a ‘repudiation’ of the contract before the time for performance. Unless indicated otherwise, the two terms are used interchangeably in this article.

3. W H E Jaeger (ed) Williston on Contracts (New York: Baker, Voorhis & Co Inc, 3rd edn, 1968) vol 11, §§ 1309, 1313, 1319.

4. (1853) 2 El & BI 678, 118 ER 922.

5. For examples of these legal effects, see below n 73 and associated text.

6. M Mustill ‘Anticipatory Breach of Contract: The Common Law at Work’ in Butterworth Lectures 1989–1990 (London: Butterworths, 1990) p 41.

7. [1962] AC 41, HL.

8. See below n 34 and associated text.

9. Leigh v Paterson (1818) 8 Taunt 540 at 541, 129 ER 493 at 494, per Dallas CJ. See also J M Thomson ‘The Effect of A Repudiatory Breach’ (1978) 41 MLR 137 at 137; E McKendrick Contract Law Text, Cases, and Materials (Oxford: Oxford University Press, 2003) p 972; J Beatson Anson's Law of Contract (Oxford: Oxford University Press, 28th edn, 2002) p 565.

10. E Tabachnik ‘Anticipatory Breach of Contract’ [1972] CLP 149 at 158, 161.

11. Hochster v De la Tour (1853) 2 El & B1678, 118 ER 922.

12. (1853) 2 El & Bl 678 at 690, 118 ER 922 at 926. For earlier authorities, see Ex p Chalmers (1873) LR 8 Ch App 289, CA; Inchbald v The Western Neilgherry Coffee, Tea, and Cinchona Plantation Company Ltd (1864) 17 CB NS 733, 144 ER 293; Withers v Reynolds (1831) 2 B & Ad 882, 109 ER 1370.

13. (1853) 2 El & Bl 678 at 693–694, 118 ER 922 at 927–928.

14. Poussard v Spiers (1876) 1 QBD 410 at 414, per Blackburn J; Jackson v Union Marine Insurance Co Ltd (1874) LR 10 CP 125 at 145, per Bramwell B, Exchequer Chamber. See also G H Treitel “‘Conditions” and “Conditions Precedent”’(1990) 106 LQR 185.

15. Mustill, above n 6, at 45.

16. J W Carter Breach of Contract (London: Sweet & Maxwell, 2nd edn, 1991) para [746].

17. (1855) 5 El & Bl 714, 119 ER 647; aff'd (1856) 6El & Bl 953, 119 ER 1119 (Ex).

18. (1855) 5 El & Bl 1714 at 728–729, 119 ER 647 at 652–653. Lord Campbell made a similar statement in Reid v Hoskins (1855) 5 El & Bl 729 at 744, 119 ER 653 at 659, QB; aff'd (1856) 6 El & Bl 953, 119 ER 1119.

19. (1855) 5 El & Bl 714 at 728, 119 ER 647 at 652–653. Frustration would destroy the shipowner's right to claim loss of bargain but not his right to claim advance freight once the advance freight became payable. See M N Howard ‘Frustration and Shipping Law - Old Problems, New Contexts’ in E McKendrick (ed) Force Majeure and Frustration of Contract (London: Lloyd's of London Press, 1991) ch 7, p 116. The shipowner in Avery did not claim for advance freight; even if he did, he should not be entitled to judgment because advance freight became payable only when the charterer shipped the goods and the charterer had not shipped the goods before the war broke out.

20. Y P Barley Producers Ltd v E C Robertson Pty Ltd [1927] Victorian LR 194 at 209, per McArthur J; M G Lloyd ‘Ready and Willing to Perform: The Problem of Prospective Inability in the Law ofcontract’ (1974) 37 MLR 121 at 130.

21. (1872) LR 7 Ex 111, Exchequer Chamber.

22. (1872) LR 7 Ex 111 at 112–113.

23. Fercometal Sarl v MSC Mediterranean Shipping Co SA (The Simona) [1989] AC 788, HL.

24. Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164, CA. Cf Braithwaite v Foreign Hardwood Co [1905] 2 KB 543, CA.

25. [1971] 1 QB 164 at 210, per Megaw LJ, CA.

26. (1872) LR 7 Exch 111.

27. (1872) LR 7 Exch 111 at 113–114.

28. (1872) LR 7 Exch 111 at 114.

29. Kaines (UK) Lid v Osterreichische Warrenhandelsgesellschaft Austrowaren Gesellschaft GmbH [1993] 2 Lloyd's Rep 1 at 13, per Dillon LJ, CA.

30. Johnstone v Milling (1886) 16 QBD 460 at 467, per Lord Esher MR, and 473, per Bowen LJ, CA; Reid v Hoskins (1855) 5 El & Bl 729 at 744, 119 ER 653 at 659, per Lord Campbell.

31. Sudan Import & Export Company (Khartoum) Ltd v Societe Generale de Compensaiion [1958] 1 Lloyd's Rep 310 at 315, per Lord Evershed MR, CA.

32. D'Tiplady ‘A Comparative Analysis of the Discharge of Contracts by Anticipatory Breach and Actual Breach with Particular Reference to the Terminology of Frustration', thesis deposited in Oxford University Bodleian Law Library (MSB Litt d 1738) (1973) p 40.

33. Universal Cargo Carriers Corpn v Citati (No 1) [1957] 2 QB 401 at 438.

34. G H Treitel The Law of Contract (London: Sweet & Maxwell, 11th edn, 2003) pp 959–960.

35. A Burrows Remedies for Torts and Breach of Contract (Oxford: Oxford University Press, 2nd edn, 1994) p 75; A L Goodhart ‘Measure of Damages When a Contract is Repudiated’ [1962] 78 LQR 263 at 267ff; and see generally, J W Carter, A Phang and S Y Phang ‘Performance Following Repudiation: Legal and Economic Interests’ (1999) 15 JCL 97.

36. White & Carter (Councils) Ltd v McGregor [1962] AC 413, HL.

37. See above n 35.

38. See below n 44.

39. [1962] AC 413 at 433, per Lord Morton of Henryton, and 439, per Lord Keith of Avonholm, HL.

40. The minority reasoned that, since ‘repudiation of a contract is nothing but a breach of contract', a duty to mitigate should arise automatically: [1962] AC 413 at 437, per Lord Keith, HL.

41. Kuines (UK) Ltd v Osterreichische Warrenhandelsgesellschaft Austrowaren Gesellschaft GmbH [1993] 2 Lloyd's Rep 1, CA; Shindler v Northern Raincoat Co Ltd [1960] 1 WLR 1038 at 1048, per Diplock J, Manchester Assizes; Melachrino v Nickoll & Knight [1920] 1 KB 693 at 697, per Bailhache J; Tredegar Iron and Coal Co Ltd v Hawthorne (1902) 18 TLR 716 at 716, per Collins MR, CA; Nickoll & Knight v Ashton Edridge & Co (1900) 2 QB 298; Roth & Co v Tuysen Townsend & Co (1895) 1 Com Cas 240, aff'd (1896) 12 TLR 211, CA. See also Treitel, above n 34, p 963.

42. See above n 29 and associated text.

43. White & Carter (Councils) Ltd v McGregor [1962] AC 413 at 427, 431, per Lord Reid, and 444–445, per Lord Hodson, HL; Lord Tucker concurred with the opinion of Lord Hodson.

44. [1962] AC 413 at 431, HL. The other qualification was that if the repudiatee could not perform his part without the co-operation of the repudiator, the repudiatee might not claim the contract price (at 430).

45. The repudiator failed to discharge the burden of showing that the repudiatee had no ‘legitimate interest’ in performing the contract in Gator Shipping Corpn v Trans-Asiatic Oil Ltd SA and Occidental Shipping Establishment (The Odenfeld) [1978] 2 Lloyd's Rep 357, QBD and Ocean Marine Navigation Ltd v Koch Carbon Inc (The Dynamic) [2003] 2 Lloyd's Rep 693, QBD, Comm Ct, but was successful to discharge that burden in the ‘extreme’ case of Attica Sea Carriers Corpn v Ferrostaal Poseidon Bulk Reederei GMBH (The Puerto Buitrago) [1976] 1 Lloyd's Rep 250, CA.

46. Clea Shipping Corpn v Bulk Oil International Ltd (The Alaskrin Trader) (No 2) [1983] 2 Lloyd's Rep 645 at 651, QBD.

47. Chilean Nitrate Sales Corpn v Marine Transportation Co Ltd & Pansuizu Compania de Navr̀gacion SA; Marine Transportation Co Ltd v Pansuiza Compania de Navègacion SA (The Hermosa) [1982] 1 Lloyd's Rep 570 at 572, per Donaldson LJ, CA; Johnstone v Milling (1886) 16 QBD 460; Barrick v Buba (1857) 2 CB NS 563 at 579–580, 140 ER 536 at 543, per Cockburn CJ; Avery v Bowden (1855)5 El & Bl 714, 119 ER 647, aff'd (1856) 6 El & Bl 953, 119 ER 1119 (Ex); Ehrensperger v Anderson (1848) 3 Exch 148 at 158, 154 ER 793 at 797, per Parke B; Rees v Lines (1837) 8 Carr & P 126, 173 ER 427.

48. Chilean Nitrate Safes Corpn v Marine Transportation Co Ltd & Pansuiza Compania de Navègacion SA; Marine Transportation Co Ltd v Pansuizn Compania de Navègacion SA (The Hermosa) [1982] 1 Lloyd's Rep 570, CA; Anchor Line v Keith Rowell (The Hazelmoor) [1980] 2 Lloyd's Rep 351, CA; Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277, HL; Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757, HL.

49. Motor Oil Hellas (Corinth) Refineries SA v Shipping Corpn of India (The Kanchenjunga) [1990] 1 Lloyd's Rep 391 at 398, per Lord Goff of Chieveley, HL; Fercometal Sarl v MSC Mediterranean Shipping Co SA (The Simona) [1989] AC 788 at 799–801, 805, per Lord Ackner, HL; Bentsen v Taylor Sons & Co (No 2) [1893] 2 QB 274 at 279, CA.

50. Berners v Fleming [1925] Ch 264 at 271, per Pollock MR, CA.

51. Sudan Import & Export Company (Khartoum) Lld v Societe Generale de Compensarion [1958] 1 Lloyd's Rep 310, CA. A may thus maintain the contract ‘in being for the moment, while reserving his right to treat it as repudiated if his contract partner persists in his repudiation': see Stocznia Gdanska SA v Latvian Shipping Co (No 3) [2002] EWCA Civ 889, [2002] 2 Lloyd's Rep 436 at [87], per Rix LJ.

52. For example, Jaks (UK) Ltd v Cera Investment Bank SA [1998] 2 Lloyd's Rep 89 at 96, per Moore-Bick J, QBD (an expression of disagreement with a unilateral cancellation of a letter of credit coupled with a reservation of claims under it sufficed to be an effective acceptance); Gunton v Richmond-upon-Thames London Borough Council [1981] 448 at 469, per Buckley LJ, CA (an acceptance might be easily inferred in personal service contracts); Vitol SA v Norelf Ltd (The Santa Clara) [1996] AC 800, HL (even mere silence might constitute an effective acceptance).

53. Stocznia Gdanska SA v Latvian Shipping Co (No 3) [2002] EWCA Civ 889, [2002] 2 Lloyd's Rep 436 at [95] (a repudiation is continuing if there is on the repudiator's side a ‘pregnant silence, a silence that speaks of maintained recalcitrance’ when there is a duty to speak). See also Safehaven Investments Inc v Springbok Ltd (1996) 71 P & CR 59 (Ch) at 68; Johnson v Agnew [1980] AC 367 at 398, per Lord Wilberforce, HL; Danube and Black Sea Railway and Kustendjie Harbour Co Ltd v Xenos, Xenos v Danube and Black Sea Railway and Kustendjie Harbour Co Ltd (1863) 13 CB NS 152, 142 ER 753, aff'd (1863) 13 CB NS 825, 143 ER 325 (a repudiation was effectively accepted at the last day before the time for performance even though the repudiatee had been consistently pressing for performance up to that day). Alternatively, affirmation in these circumstances may be said to be ‘revocable’: see G H Treitel ‘Affirmation after Repudiatory Breach’ (1998) 114 LQR 22.

54. Peter Turnbull & Co Proprietary Ltd v Mundas Trading Company (Australasia) Proprietary Ltd [1954] 2 Lloyd's Rep 198, Aus HC.

55. Fercometal Sarl v MSC Mediterranean Shipping Co SA (The Simona) [1989] AC 788 at 805, per Lord Ackner, HL.

56. See above n 24 and associated text.

57. Tai Hing Cotton Mill Ltd v Karnsing Knitting Factory [1979] AC 91, PC; Millett v Van Heek & Co [1921] 2 KB 369, CA; Melachrino v Nickoll and Knight [1920] 1 KB 693; Michael v Hart & Co [1902] 1 KB 482, CA.

58. Proctor & Gamble (Health and Beauty Care) Ltd v Carrier Holdings Ltd [2003] EWHC 83 (TCC), [2003] Building LR 255; Wilkinson v Verify (1871) LR 6 CP 206. Court of Common Pleas.

59. It was once suggested that when a renunciation was acted upon in certain ways by the repudiatee, it might cease to be retractable and future performance might thus become impossible: see Danube and Black Sea Railway and Kustendjie Harbour Co Ltd v Xenos, Xenos v Danube and Black Sea Railway and Kustendjie Harbour Co Ltd (1863) 11 CB NS 152 at 178–178, 142 ER 753 at 763, per Erle CJ, and 181, 765, per Keating J. Normally such an act of reliance would be construed by the courts as an acceptance of the repudiation.

60. Ford v Tiley (1827) 6 B & C 325 at 328, 108 ER 472 at 473; Main's Case (1596) 5 Co Rep 20b at 21a, 77 ER 80 at 81; Temp E 1 Covenant 29; 1 Roll Abr 248 pl 1 (8 Vin 225); Co Litt 221b, cited by Lord Coke in 21 Edw 4 (CB) 55. It was thus said by Sir Michael Mustill that ‘it was the act of self-disablement, not the fact of inability, which discharged the promisor and,… gave him a remedy in damages': see Mustill, above n 6, p 25.

61. Robinson v Harman (1848) 1 Ex 850 at 855, 154 ER 363 at 365, per Parke B.

62. For this reason, it seems that, for the purpose of describing the object of contractual damages, the term ‘expectation interest’ should be preferred to the term ‘performance interest’, as the former denotes that, apart from the performance of contract, the maintenance and integrity of contractual relationship may also fall under the umbrella of contractual damages. Cf D Friedmann ‘The Performance Interest in Contract Damages’ [1995] 111 LQR 628.

63. (1886) 16 QBD 460, CA.

64. (1886) 16 QBD 460 at 467, per Lord Esher MR, CA.

65. (1886) 16 QBD 460 at 473, per Bowen LJ, CA.

66. P M Nienaber ‘The Effect of Anticipatory breach: Principle and Policy’ [1962] CLJ 213 at 221; L Vold ‘Anticipatory breach of Contracts and Necessity of Election’ (1927-28) 26 Mich LR 502 at 508ff; J C Smith ‘Anticipatory Breach of Contract’ in E ZLomnicka and C G J Morse (eds) Contemporary Issues in Commercial Law (London: Sweet & Maxwell, 1997) p 180; H R Limburg ‘Anticipatory breach of Contracts’ (1914-25) 10 Corn LQ 135 at 140, 148ff; Jaeger (ed), above n 3, § 1320. Cf F Dawson ‘Metaphors and Anticipatory Breach of Contract’ [1981] CLJ 83 at 95, 102.

67. For example, in cases where it was held that that it was the court of the place where an anticipatory breach was committed, rather than the place where it was received or accepted, that had jurisdiction over disputes arising from it: see Martin v Stout [1925] AC 359, PC; Holland v Bennett [1902] 1 KB 867, CA; Cherry v Thompson (1872) LR 7 QB 573; and in cases where it was held that the only cause of action a repudiatee had was that arising from the repudiation and acceptance of the repudiation was ‘a matter going to remedy rather than a fresh fact necessary to complete a new cause of action', see Tilcon Ltd v Landand Real Estate Investments Ltd [1987] 1 WLR 46 at 53, per Dillon LJ, CA.

68. In contrast, in the Scottish case Monklands District Council v Ravenstone Securities 1980 SLT (Notes) 30, Lord Dunpark explicitly rejected as ‘self-contradictory’ the contention that an anticipatory breach was not per se a breach of contract and could be converted into a breach by acceptance.

69. [2003] EWCA Civ 1324, [2003] Building LR 477 at [38]ff.

70. 'An unaccepted repudiation is a thing writ in water and of no value to anybody: it confers no legal rights of any sort or kind': Howard v Pickford Tool Co Ltd [1951] 1 KB 417 at 421, CA. In Johnstone v Milling (1886) 16 QBD 460 at 473, Bowen LJ also described an unaccepted anticipatory breach as a 'brutum fulmen' (empty threat).

71. See Mustill, above n 6, pp 61–62.

72. Heyman v Darwin Ltd [1942] AC 350 at 361, per Viscount Simon LC, HL; Golding v London & Edinburgh Insurance Co, Ltd (1932) 43 Ll L Rep 487 at 488, per Scrutton LJ, CA. The statement in these two cases was explicitly endorsed by Evershed MR in Howard v Pickford Tool Co Ltd [1951] 1 KB 417 at 421, CA.

73. Ellis mid Company's Trustee v Dixon-Johnson [1924] 1 Ch 342.

74. Husham v Zenab [1960] AC 316, PC EA.

75. Indeed, the unaccepted anticipatory breach was explicitly recognised as an ‘outstanding breach’ by Tomlinson J in the Commercial Court, cited in Manx Electricity. v J P Morgan Chase Bank [2003] EWCA Civ 1324, [2003] Building LR 477 at [32], per Rix LJ, and as an ‘actual repudiatory breach’ by Rix LJ in the Court of Appeal at [36].

76. Decro-Wall SA v Marketing Ltd [1971] 1 WLR 361 at 370–371, per Salmon LJ, and 378–379, per Sachs LJ, CA.

77. Johnstone v Milling (1886) 16 QBD 460, CA.