BREACH

I. DEFINITION

Discharge by Termination for Breach of Condition (s Discharge by Frustration (s 7 SGA)

11(2) Sale of Goods Act)
A seller acting in breach of a condition under a sale A seller contracted to sell specific goods to the
of goods contract, delivered goods not in conformity buyer but, subsequent to the contract, without any
with contractual requirements1. The buyer lawfully fault on the seller’s or buyer’s part, those goods
elects to reject the goods and terminate the perish before the risk passes to the buyer1. The
contract; contract is avoided automatically and by operation
thereby discharging the buyer of his obligation to of law2, thereby discharging the seller’s obligation to
pay the price before the buyer’s payment deliver the goods
obligation matures3. and also discharging the buyer’s obligation to pay
the price before the buyer’s payment obligation
matures3.
Note 3 – s 28: Unless otherwise agreed, delivery of goods and payment of price are concurrent obligations:
The seller must be ready and willing to give possession of the goods to the buyer in exchange for the price
and the buyer must be ready and willing to pay the price in exchange for possession of the goods.
Note 1 – Note 1 – Generally, under a contract for the sale of
S 12(1): Implied condition that seller has right to sell specific goods, property in the goods passes from
the goods seller to buyer at such time when intended (s 17);
s 13(1): Implied condition that goods will correspond and, unless otherwise agreed, risk passes to the
with the description where there is a sale by buyer when property passes (s 20). (Note, however,
description the usual presumption that property in specific
s 15(2)(a): Implied condition that the bulk of goods goods passes to the buyer at the time when the
will correspond with the sample in quality where contract is made (s18 r1 SGA).)
there is a sale by sample Note 2 – Frustration
s 14(2): Implied condition that goods supplied will
be of satisfactory quality where the seller sells in
the course of business
s 14(3): Implied condition that goods supplied are
reasonably fit for the buyer’s particular, disclosed,
purpose, where the seller sells in the course of
business and the buyer reasonably relies on the
seller’s skill or judgment
Treitel’s definition p832: “A breach of contract is
committed when a party without lawful excuse fails
or refuses to perform what is due from him under the
contract, or performs defectively or incapacitates
himself from performing.”
“Without lawful excuse”
When one party is in breach and the aggrieved party Non-performance because of frustration is not
has the right to terminate performance of the breach because both parties have been
contract, latter party is not in breach since he has a automatically discharged
“lawful excuse” for non-performance

Treitel’s definition does not tell us what a breach is or when a breach occurs. This, however, is a content question
and depends on the construction of the terms of the contract. Only general rule is that breach is of strict liability.

Where non-performance does not amount to breach (Sem 2):

1) “Void” for Mistake (s 6 SGA)
2) Rescission of “Voidable” Contract e.g. misrepresentation
 Parties are not discharged forthwith of their future obligations
 Contract has not been terminated, but rescinded ab initio (treated as if it had not been made)
 Or an apparent contract has been discovered to have been void (there was never actually a contract in the
first place)

II. CONSEQUENCES OF BREACH

As laid out by Lord Diplock in Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 (BBF 611):
 Parties are free to determine what primary obligations they will accept
o Basic principle of common law of contract
o They can state these expressly in the contract itself, or leave them to be incorporated by implication
(what is often done; “in practice a commercial contract never states all the primary obligations of the
parties in full”)
 Breaches of primary obligations (“every failure to perform a primary obligation is a breach of contract”)
o Give rise to substituted or secondary obligations on the defaulting party
 By implication of common law, the “general secondary obligation” is to pay monetary
compensation (damages) to the aggrieved party for his loss sustained as a result of the
breach/for non-performance of his primary obligations
 Apply even in the cases of the two exceptions
o In some cases, may entitle the aggrieved party to be relieved from further performance of his own
primary obligations
 But the primary obligations of both parties so far as they have not yet been fully performed
remain unchanged, with two exceptions
o These two consequences also arise by implication of law; generally common law, but sometimes
statute
o Note that courts rarely enforce a primary obligation by decreeing specific performance
 Two exceptions
1) Fundamental breach
 Defaulting party’s failure to perform a primary obligation deprives aggrieved party of
substantially the whole benefit which both parties intended for him to obtain from the contract
 Aggrieved party may elect to put an end to all primary obligations of both parties remaining
unperformed
2) Breach of condition
 Where both parties have agreed (whether expressly or impliedly by law) that any failure by one
party to perform a particular primary obligation (“condition”) will entitle the other party to elect
to put an end to all primary obligations of both parties remaining unperformed
 Irrespective of the gravity of the event that has in fact resulted from the breach
 Effect of aggrieved party’s election to end both parties’ remaining primary obligations
o Anticipatory secondary obligations additional to the general secondary obligations (damages for non-
performance of primary obligations) arise by implication of law
 The defaulting party’s remaining unperformed primary obligations are substituted for a
secondary obligation to pay monetary compensation (damages) to the aggrieved party, for his
losses from defaulting party’s non-performance in the future
 These arise under contracts of all kinds, except to the extent that that it is excluded or modified
by the express words of the contract
 Implication by common law in cases of fundamental breach
 Implication by statute law in cases of breach of condition (except in the case of ‘deviation’ from
the contract voyage under a contract of carriage of goods by sea, where it arises by common
law)
o Aggrieved party’s unperformed primary obligations discharged
 End of primary obligations in the two exceptions at the election of the aggrieved party have been referred
to as the “determination” or “rescission” of the contract, or “treating the contract as repudiated”
o The first two are misleading as it must be kept in mind that the unperformed primary obligations of
the party in default there are substituted by operation of law the secondary obligations
 Ending of primary obligations leaves the parties in the relationship of a bailor and bailee, “in which they
owe to one another by operation of law fresh primary obligations of which the contract is the source; but
no such relationship is involved in the instant case”
Small Mac way of looking at it:
 Breaches of primary obligations give rise to substituted secondary obligations, of which there are two
types
 General secondary obligation
o Primary obligations of both parties, insofar as they have not yet been fully performed, remain
unchanged
o But breach gives rise to a secondary obligation to pay monetary compensation to aggrieved party for
the loss sustained by him in consequence of the breach
o Arises on breach of warranty
 Anticipatory secondary obligation
o Arises where breach of a primary obligation entitles aggrieved party to elect to terminate
performance of the contract, and he so does elect (repudiatory breach)
o All primary obligations of both parties remaining unperformed at put to an end
o And are substituted by implication of law with a secondary obligation to pay monetary compensation
to the other party for the loss sustained by him in consequence of their non-performance
o Difference is that it enables damages to be assessed by reference to those obligations which would
have fallen due for performance at some time in the future
o Arises on breach of condition (and fundamental breach)

III. CLAIMS BY THE DEFAULTING PARTY

Breach of a promissory term
1) Entire contract/obligations
2) Severable/divisible obligations
3) Doctrine of substantial performance

Can the defaulting party, notwithstanding his breach, enforce the aggrieved party’s obligations under the
contract?
1. ENTIRE CONTRACT/OBLIGATION
 Cannot claim recovery for partial performance
 Complete performance is required
Cutter v Powell (1795) 6 Term Rep 320 (BBF 556)
Facts  Df delivered a note to intestate at Jamaica, stating that he would pay the intestate thirty
guineas ten days after arrival at Liverpool, “provided [the intestate] proceeds, continues
and does his duty as second mate in the said ship from hence to the port of Liverpool”.
 Intestate set sail on the ship and proceeded to do his duty as second mate, but died before
the ship’s arrival at Liverpool.
 Wife claimed for the payment.
Holding No recovery.

Ashhurst J:
 The written contract speaks for itself. It is entire, and the Df’s promise depends on a
condition precedent to be performed by Pf, thus the condition must be performed fully
before Pf is entitled to receive anything under the contract.
 Pf cannot recover on a quantum meruit (just sum for services provided) because she has no
right to desert the express contract. One “cannot relinquish or abide by it as it may suit his
advantage”
 The intestate was bound by the terms of his contract to perform a given duty before he
could claim any payment from Df; a condition precedent which without performing, Df was
not liable
 Even though the intestate was not to blame for failing to perform his part of the contract,
he still failed to perform the condition precedent and his wife is not entitled to recover

More of a case demonstrating what an entire contract is, rather than breach.

2. DIVISIBLE CONTRACT
 Can lawfully claim a proportionate payment if divisible obligations of a contract are successfully fulfilled

Can claim to extent of consideration:

Taylor v Laird (1856) 1 H & N 266, 25 LJ Ex 329 (BBF 557)
Facts Pf was employed to command a steamer “for an exploring and trading voyage up the river
Niger… at the rate of £50 per month”.
Pf took the vessel up as far as Dagbo, but refused to go further and abandoned the command.
Pf had served eight months but only seven months paid so far.
Holding Held that this was not a contract for the entire voyage i.e. divisible obligations.
 The phrase “per month” gave rise to a cause of action for the salary as each month arose,
and which, once vested, was not subject to be lost or divested by the Pf’s desertion or
abandonment of the contract.
 Further, that the parties could not have intended for Pf’s performance of the entire work
contracted for as a condition precedent to the right to receive anything. If not, if the Pf had
died or the voyage failed at the last moment, nothing would be payable by the Df.

Difficult to draw distinctions between divisible obligations and entire contracts:

Tong Aik (Far East) Ltd v Eastern Minerals & Trading (1959) Ltd [1963] MLJ 322
Facts  There was a contract for management of a mine. It stipulated that Pf should “be able” to
supply Df with 5k tons of ore monthly. Pfs were also responsible for transportation.
 Pf was to be paid per ton for operations and transportation, and reserved right of Df to
terminate contract after 6 months.
 The minimum amount of 5k tons per month was never produced.
 Pf claimed for part performance (on what was produced). Df counterclaimed for losses
incurred, claiming that contract was an entire contract, and since Pf did not supply 5k tons
monthly, they had breached the contract.
Holding Held that it was a divisible contract. Winslow J:
 By its terms (especially payment per ton and termination clause), contract contained
mutually concurrent and dependent promises (that the performance of the promise of each
party was conditional upon the performance of the promise of the other, at the same time).
No conditions precedent, etc.
 There was nothing in the contract to suggest how long it was intended to last or that
payment would only be made on completion of any undertaking as a whole or after the
expiration of any stipulated period of time.
o “Looked at in this way it does not seem to me that this is a contract which was
intended to be fulfilled only as a whole. It possesses more of the characteristics of a
divisible contract to be fulfilled in parts. The distinction is not always easy to draw but
it is difficult to appreciate in what the "wholeness" of the contract lies.”
 Pf to be paid for tonnages of ore actually produced and/or transported to stockpile.
Presumably until the ore was exhausted or until termination otherwise.
 Even if not divisible, contract carried right of Pf to quantum meruit claim.

Halsbury’s Laws of England, 3rd Edn at p166:

 Entire contract
o Consideration is one and entire, OR
o No consideration is to pass from one party till the whole of the obligations of the other
party have been completed
o Right of payment does not arise until the contract has been completely performed
(but claim will be allowed if there is substantial performance, but subject to
counterclaim for defects)
o Pollock on Contracts, 13th Edn at p209: “A contract which can be fulfilled only as a
whole, so that failure in any part is failure in the whole, is said to be entire.”
 Divisible contract
o Number of considerations for number of acts (e.g. periodical payment for a number
of services)
 o Right to payment arises as each part of the contract is performed; where there has
been partial performance a proportionate payment may be recovered
o Pollock on Contracts, 13th Edn at p209: “A contract of which the performance can be
separated, so that failure in one part affects the parties` rights as to that part only, is
said to be divisible.”
Remarks Recognised by SGCA in Tan Jin Sin and another v Lim Quee Choo

3. SUBSTANTIVE PERFORMANCE
 Part performance as well, no need for complete performance
 BUT operates within the framework of an independent contract examined on its own terms; complements
entire obligations only (not divisible obligations)
 Subject to set-off or counterclaim for defects that prevented the complete performance

Would Pf be able to claim for defective performance?

Building & Estates v AM Connor [1958] MLJ 173
Facts  Df bought plot of land together with house to be erected thereon for a lump sum.
 Df refused to pay balance sum on the ground that it was not built exactly according to
specification and much of the work was defective and of inferior quality.
 Df counterclaimed for expenses to fix the defects.
Holding  Held that Pf could claim even if Df claimed performance was defective. Work done was
substantial.
 Whyatt CJ: “… if the ordinary rule governing the discharge of contracts by performance
were to be applied it would be necessary for the plaintiffs to show that they had
performed their obligations completely and precisely before they could recover
anything for the work they have done.”
 But now, common law has established that “in certain circumstances a promisor who
has substantially performed his side of the contract may sue on the contract for a lump
sum but, of course, remains liable in damages for his partial failure to fulfil his
contractual obligations”
 Applied Hoenig v Isaacs [1952] 2 All ER 176, citing Denning LJ:
o On the true construction of the contract, was entire performance a condition
precedent to payment?
o Not necessarily so even in a lump sum contract
o When a contract provides for specific payment on completion of specified
work, courts “lean against a construction of the contract which would deprive
the contractor of any payment at all simply because there are some defects
or omissions.”
o Therefore the promise to complete work is merely construed as a term, but
not a condition (vital)
o Unless the breach goes to the root of the matter e.g. Abandonment of work
when it is only half done, the employer cannot resist payment. He must pay
and counterclaim for defects OR set them up in diminution of price.
o Measure of loss is calculated by the cost of rectifying defects
 Pfs were entitled to sue for contract price on the basis that they can show that work
done “constitutes substantial compliance with the contract”
 The defects and omissions complained of were trivial or of minor importance; house
was “a perfectly sound dwelling”. Court held that work was substantially performed
(expert witnesses, judge went on-site to inspect), though not in exact accordance with
the specifications.
 Df was liable for the balance subject to any deduction brought in the counterclaim.
Remarks Applied Hoenig v Isaacs principles; also in San International Pte Ltd v Keppel Engineering Pte Ltd
(materiality of the refusal to perform the outstanding work must be weighed in context of the
obligation then remaining unperformed – Afovos Shipping Co SA v Pagnan)

Substantive performance claimable as long as breach does not go to the “root of the contract”:
Hoenig v Isaacs [1952] 1 TLR 1360
 Facts  Df employed Pf to decorate Df’s flat for £750 (lump-sum contract). Work was finished with
some defects in a bookcase and a wardrobe, which would cost £55 to rectify.
 Df moved into the flat, but refused to pay the outstanding balance of the contract price.
Holding Denning LJ at 1367, as cited in Building & Estates v AM Connor (see above).
Not every breach will absolve the need to pay, but that does not mean the contractor is always
entitled to be paid.

But cannot claim for substantial performance if defect goes to root of the contract:
Bolton v Mahadeva [1972] 1 WLR 1009
Facts  Pf agreed to install central heating in the Df’s house for a lump sum of £560. The system
gave off insufficient and uneven heat, and also gave off fumes.
 Pf refused to correct the defects, which could be put right for about £174. Df refused to pay
anything.
Holding CA held that Pf was not entitled to recover, because there had been no substantial performance.
Balancing process:
 Where amount of work not carried out under a lump sum contract was very minor in
relation to the whole contract, contractor may be entitled to be paid the lump sum subject
to a proper deduction for the uncompleted work
 Must consider (1) nature of defects (2) proportion between the cost of rectifying them and
contract price
o CANNOT say that payment is claimable only if defects are so trifling they are covered
by the de minimis rule
o Cairns LJ: “… if the putting right of those defects is not something which can be done
by some slight amendment of the system, [no substantial performance]”
o Sachs LJ: “It is not merely that so very much of the work was shoddy, but it is the
general ineffectiveness of it for its primary purpose that leads me to that conclusion.”
(Looked at multiple factors, not just scale of defects: aggregate number of defects,
importance of some of them, how they prevented the installation from doing what
was intended)
 Here, unlike the previous 2 cases, the central heating was practically unusable
 Aggravating factor: Df informed Pf about defects but Pf refused to do anything about it

Treitel’s critique:

‘Cases such as Hoenig v Isaacs are sometimes explained on the ground that the claimant had “substantially”
performed an “entire contract”. It is submitted that the explanation is unsatisfactory since it is based on the
error that contracts, as opposed to particular obligations are, can be entire. The basis of Hoenig v Isaacs is that
the builder even if he was under an entire obligation as to the quantity of the work to be done, was under no
such obligation as to its quality. Defects of quality therefore fell to be considered under the general requirement
of substantial failure. To say that an obligation is entire means that it must be completely performed before
payment becomes due. Suppose a contract is made to carry goods from Melbourne to London and the freight is
payable on delivery in London. If the goods are carried only to Southampton, the carrier may have “substantially”
performed; but he is not entitled to the freight. In relation to “entire” obligations, there is no scope for any
doctrine of “substantial performance”.’
 A contract is made up of qualitative and quantitative obligations
 However, “substantive performance” only considers the quantitative obligation without considering
qualitative obligation
o BUT Bolton considers quality of the work done by multiple factors to decide on substantive
performance? Not just the scale and quantity
 Thus, wrong to say that this “substantive performance” relates to the “entire contract”. In reality, only the
entire quantitative obligation has been “substantively performed” and there is no entire obligation with
regards to quality.
 Treitel thus advocates examining the obligation to see if it is entire or not, rather than the contract.

4. RESTITUTIONARY CLAIM
Acceptance of partial performance: Quantum meruit (for services)/Quantum valebat (for goods)
 i) A party (Pf) who has rendered some performance (inadequately, in breach of contract) is allowed to
recover a reasonable sum;
ii) Where there is evidence of a fresh contract to pay for the work done and;
iii) “The circumstances give an option to the aggrieved party (Df) to take or not to take the benefit of the
work done” i.e. freely accepted defaulting party’s partial performance or otherwise waived the need
for complete performance
 Reduces the harshness of a contract
 Basis
o Previously, acceptance of partial performance implied a fresh agreement to pay for the work done or
goods supplied. But possibly fictional.
o Today, rests on basis of unjust enrichment

Sumpter v Hedges [1898] 1 QB 673 (BBF 559)

Facts  Pf (builder) contracted to build upon Df’s land two houses and stable for the lump sum of
£565.
 Pf did part of the work, amounting in value to £333 and had received payment of part of
the price.
 Pf informed Df he had no money and could not go on with the work.
 Df finished the buildings on his own account, using building materials which Pf had left on
the ground.
Holding Judge gave judgment for Pf for the value of materials used, but allowed him nothing in respect
of the work he had done upon the buildings for quantum meruit.

AL Smith LJ:
 Pf was found to have abandoned the contract
 “The law is that, where there is a contract to do work for a lump sum, until the work is
completed the price of it cannot be recovered.”
 Therefore, Pf could not recover on the original contract but was entitled to recover on
quantum meruit for the partial performance, if there is evidence of a fresh contract to pay
for this work already done

Collins LJ, regarding the requirement for quantum meruit:

 For a quantum meruit claim to succeed, “circumstances must be such as to give an option
to Df to take or not to take the benefit of the work done” (iii)
 Only in such circumstances is there evidence to infer a new contract to pay for work done
on a quantum meruit
 The mere fact that a Df is in possession of what he cannot help keeping, or even has done
work upon it, does not give rise to the inference of a fresh contract (ii)
 He is not bound to keep an unfinished building (which would be a nuisance) on his land; Df
had no choice but to accept what was done on his land
 Since he did not have the option, Pf cannot claim on quantum meruit
Remarks Df did not oppose costs of building materials used, probably because he had a choice in deciding
whether or not to use those materials (and thus accept or reject the benefit).

Contractual quantum meruit vs restitutionary quantum meruit

Foo Song Mee v Ho Kiau Seng [2011] SGCA 45, Chao JA at [18]
Holding  Claims based on quantum meruit can be found upon contract or restitution
 Contract
o Cases where there is an express or implied contract for supply of services though this
same contract lacks a term on the quantum of remuneration
 Restitution
o Cases where there is no contract at all
o Basis of the claim is to correct the otherwise unjust enrichment of the Df
 No claim in quantum meruit if there exists a contract for an agreed sum; no claim in
restitution parallel to an inconsistent contractual promise between the parties
 5. INCONTROVERTIBLE BENEFIT?

 Sumpter v Hedges – mere fact that a person appears to have benefited from part performance does not
suffice to ground a claim in restitution
 This is because unjust enrichment law allows objective benefits to be “subjectively devalued” by Df
 However, where it can be shown that a recipient of part performance has gained a readily realizable
financial benefit or has been saved expenses which he must have incurred, there is some support for the
view that the part performer would be entitled to restitution
o Hain SS Co Ltd v Tate & Lyle Ltd (below)
o Miles v Wakefield
 Except where parties have made it clear that the risk of non-completion is to be borne by the part-performer
even if there is such benefit
Hain SS Co Ltd v Tate & Lyle Ltd [1936] 2 All ER 597; 41 Com Cas 350
Dicta “Let me put a quite possible case: A steamer carrying a cargo of frozen meat from Australia to
England deviates by calling at a port outside the usual or permitted route: it is only the matter
of a few hours extra steaming: no trouble ensues except the trifling delay. The cargo is duly
delivered in England at the agreed port. The goods owner has had for all practical purposes the
benefit of all that his contract required; he has had the advantages, of the use of a valuable ship,
her crew, fuel, refrigeration and appliances, canal dues, port charges, stevedoring. The
shipowner may be technically a wrongdoer in the sense that he has once deviated, but
otherwise over a long period he has been performing the exacting and costly duties of a carrier
at sea. I cannot help thinking that epithets like "unlawful" and "unauthorised" are not apt to
describe such services; it may be that by the maritime law the relationship of carrier and goods
owner still continues despite the deviation, though subject to the modifications consequent on
the deviation. Nor can I help feeling that the court would not be slow to infer an obligation when
the goods are received at destination to pay, not indeed the contract freight, but a reasonable
remuneration”
Remarks If you can show that the recipient of the benefit cannot argue that he has received no benefit
from you, he has to pay for the benefit received.

IV. AGGRIEVED PARTY’S RIGHT TO TERMINATE

 Not every breach would entitle the party to terminate (end primary obligations), although every breach
entitles the party to damages (secondary obligation)
 Aggrieved party may sometimes find that the most effective remedy against a defaulting party is his right
to terminate the contract; but unless he has the right to do so, attempting termination would be breach of
contract by himself

Situations entitling an innocent party to terminate contract at common law, tabulated by Phang JA in RDC
Concrete v Sato Kogyo [2007] 4 SLR(R) 413 [113]:
Situation Circumstances in which termination is legally justified Relationship to other situations
I. EXPRESS REFERENCE to the right to terminate and what will entitle the innocent party to
terminate the contract
1 Express termination clause: The contractual term breached None – it operates independently
clearly states that, in the event of certain event or events of all other situations.
occurring, the innocent party is entitled to terminate the
contract. Situations 2, 3(a) and 3(b) (i.e.
situations in II below) are not
No breach required, but has the same effect as breach of relevant.
condition (in condition-warranty approach).
Commented [EL1]: “By words or conduct evinces an
II. NO EXPRESS REFERENCE to the right to terminate and what will entitle the innocent party to intention not to perform or expressly declares that he is or
terminate the contract will be unable to perform his obligations in some material
2 Repudiation: Party in breach, by words or conduct, None – it operates independently aspect. Short of an express refusal or declaration the test is
renounces the contract by clearly conveying of all other situations. to ascertain whether the action/actions of the [defaulting
(expressly/impliedly) to the innocent party that it will not party would lead] a reasonable person to conclude that he
perform (unwilling/unable) its contractual obligations at all. Situation 1 is not relevant. no longer intends to be bound by its provisions.” – M
Karthigesu JA (SGCA) in San International Pte Ltd v Keppel
Engineering Pte Ltd [1998] 3 SLR(R) 447 [20]
 Quaere (inquiry) whether the innocent party can terminate
the contract if the party in breach deliberately chooses to
perform its part of the contract in a manner that amounts
to a substantial breach. Courts have an open position on
this.
3(a) Condition-warranty approach: Party in breach has breached
a condition of the contract (as opposed to a warranty).
3(b) Hongkong Fir approach: Party in breach which has
committed a breach, the consequences of which will
deprive the innocent party of substantially the whole
benefit which it was intended that the innocent party
should obtain from the contract.
Situations 3(a) and 3(b) are not
relevant.
[95]: “… the preferable view … [is]
that whether or not the innocent
party is entitled to terminate …
depend[s], in the final analysis,
upon whether or not the tests
pursuant to [3(a) and 3(b)] are
satisfied and in the manner or
order proposed below.”
Apply this before 3(b).
Situation 1, 2 are not relevant.
Only apply this after 3(a) AND if
the term breached is not a
condition.
Situation 1, 2 are not relevant.

(fundamental breach – nature and consequences “go to the

root of the contract”)

Summary
Situation 1 Contract expressly provides for parties to terminate on occurrence of a certain event or
events. Event or events occur. (i.e. no breach required)
Situation 2 Defaulting party renounces the contract by conveying that it will not perform its contractual
obligations at all. Innocent party entitled to terminate if party in breach had breached a
condition, or substantially breached the contract when breaching a warranty. i.e. 3a or 3b
satisfied.
Situation 3a Defaulting party breaches a condition.
Situation 3b Defaulting party breaches a warranty and the consequences of which will deprive the
aggrieved party of substantially the whole benefit which it was intended that the aggrieved
party should obtain from the contract.

 Situations are mutually exclusive save for the relationship between 3(a) and 3(b).
 While distinct, depending on the facts of the case at hand, may conflict with each other (RDC v SK [90]) and
produce different/diametrically opposed results
o Where the term which is breached is classified as a warranty under the condition-warranty approach
(no termination under 3a) but where the consequences of the breach are so serious as to deprive the
innocent party of substantially the whole benefit that it was intended that the innocent party should
have (termination under 3b) – i.e. an “important warranty”?
o Where the term which is breached is classified as a condition under the condition-warranty approach
(termination under 3a) but where the consequences of the breach are not so serious as to deprive the
innocent party of substantially the whole benefit that it was intended that the innocent party should
have (no termination under 3b) – but unlikely, since a condition is a term the parties intend to be so
important that if breached would terminate the contract!! First situation is likely though

From RDC v SK [100]-[109]:

SITUATION 3(A)
Seeks to ascertain parties’ intentions regarding the
nature of the contractual term in advance (at time of
contracting). Innocent party’s right depends on
whether term is a ‘condition’ or ‘warranty’.
SITUATION 3(B)
Requires a confirmation of the innocent party’s right
to terminate after both parties “wait and see” what
the nature and consequences of the breach actually
are (Lord Lowry in Bunge at 719, the “wait and see”
method)
 Tends to certainty and predictability Tends to fairness (prevents a party from terminating
the contract on excessively technical grounds in a bid
to escape from unfavourable bargains)
BUT there is no dichotomy between the two? It is also fair to hold the contracting parties to their bargain in
3(a).
Gives effect to parties’ intentions and is preferred, Often thought to apply to
especially when parties have evinced an intention ‘intermediate/innominate’ terms, neither condition
that the contractual obligation was to have the force nor warranty.
of a condition.  Innominate terms could give rise to either very
substantial or very trivial consequences. This
would effectively and practically obliterate the
distinction between a condition and warranty,
since the breach of virtually any term could result
in very substantial or very trivial consequences
(Megaw LJ in Bunge at 537)
 A wholesale adoption of the Hongkong Fir
approach would eclipse the condition-warranty
approach completely and this should not be the
case. (RDC v SK [105])

But both situations 3(a) and 3(b) have roles to play in the law. RDC v SK [109]: “… the condition-warranty
approach is, looked at in this light, itself a manifestation of fairness between the contracting parties – whilst
simultaneously achieving certainty and predictability, as far as the facts of the case at hand will allow. Further,
by integrating the Hongkong Fir approach with the condition-warranty approach, rather than discarding the
former out of hand, the aim of achieving fairness is further enhanced and,
indeed, maximised by extending the inquiry and looking at the seriousness of the consequences of the breach
even where the term breached is not a condition.”

 In Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008], 4 RDC situations were affirmed. Furthered
RDC rule by laying down the factors relevant in ascertaining whether or not a term is a condition. (see
below)
 In Sports Connection v Deuter Sports [2009], 4 RDC situations again affirmed, with a slight modification. In
the extremely limited exception “where the term itself states expressly (as well as clearly and
unambiguously) that any breach of it, regardless of the seriousness of the consequences that follow from
that breach, will NEVER entitle the innocent party to terminate the contract, then the court will give effect
to this particular type of term (viz, a warranty expressly intended by the parties)”

V. SITUATION 3(A): CONDITION-WARRANTY APPROACH

Traditional UK approach
 A breach of any “condition” in a contract gives the aggrieved party the right to elect to terminate further
performance of the contract;
 While the breach of a mere “warranty” gives no right to terminate, regardless of whether the
consequences of the breach were serious.
 Promotes certainty as the result flowing from the breach is clear – if condition, right to terminate; if
warranty, no right to terminate

Problems
 Allows parties to escape bad bargains so long as the term is a condition (regardless of amount of loss
suffered)
 No concrete guidelines to ascertain “conditions” and “warranties”
 Harsh and potentially unfair
 But RDC argument that 3(a) gives effect to parties’ intentions, which is a manifestation of fairness
between the contracting parties; it is fair to hold parties to their original bargain.

Refinement in RDC Concrete v Sato Kogyo

 Where parties clearly intended a term to be a condition, a right of termination will always arise in respect
of the innocent party when a breach of that term occurs
o If not, the court will always look to the consequences of the breach to ascertain a right (3(b))
 UNLESS parties clearly and unambiguously state that the breach of that term will NEVER entitle the
innocent party to terminate the contract (non-termination clause). Effaces the concept of warranty (Sato
Kogyo) save for a limited exception (Sports Connection)

Therefore
1) Nature of term breached?
2) Parties’ intentions for the term to be a condition?

 Focus is on the nature of the term breached (RDC v SK [97]), and particularly, “whether the [parties’
intentions] were to designate that term as one that is so important that any breach, regardless of the actual
consequences … would entitle the innocent party to terminate the contract”. This is not to say that the
consequences are irrelevant as parties may have envisaged serious consequences.
o i.e. Whether it is a condition? Or not important enough for contract to ever be terminated by innocent
party, even if actual consequences are extremely serious (warranty)?

Implied condition (sale by description):

In re an arbitration between Moore and Company, Limited and Landauer and Company [1921] 2 KB 519
Facts  Sellers contracted to supply canned fruits in cases containing thirty tins each, payment to
be per dozen tins.
 The sellers tendered the whole quantity ordered, but about one-half of the cases contained
twenty-four tins only; the remainder contained thirty tins.
 The buyers refused on this ground to take delivery.
 There was no difference in market value of the goods whether packed twenty-four or thirty
tins in a case.
Holding This was a sale of goods by description, and as the goods contracted to be sold were mixed with
goods of a different description the buyers were entitled to reject the whole consignment.

Atkin LJ: “It appears to me to be clear that the stipulation in the contract that there shall be 21/2
dozen tins in a case is part of the description of the goods. There is, therefore, an implied
condition that the goods when tendered shall correspond with the description. That condition
was broken, and there was a right to reject”.

Sale of Goods Act (Cap 393, 1999) (UK):

13(1) – Where there is a contract for the sale of goods by description, there is an implied
condition that the goods will correspond with the description.

Specific express conditions cannot be ignored (sale by description):

Arcos v Ronaasen [1933] 1 AC 470
Facts  Buyers, who wanted wooden staves for making wooden barrels, contracted to purchase
them from the sellers.
 With respect to the length, breadth, and thickness the agreement contained stipulations
which allowed some variation in the length and in the breadth of the staves, but none in
the thickness, which in all cases was specified as half an inch.
 When the goods arrived in London the buyers purported to reject them.
Holding The buyers were entitled to reject the goods for non-conformity with contractual description in
relation to thickness (even though they could be used for making barrels i.e. “is the commercial
equivalent of that which they have bought” (Lord Buckmaster)).

Lord Atkin:
 Simple question is whether the goods when shipped complied with the implied condition
that they should correspond with the description (SGA s 13)
 Disagreed that only “substantial” compliance with contract needed to be found by a
tribunal of fact. There is no “margin”.
  If written contract specifies conditions of weight, measurement etc, these conditions must
be complied with. “A ton does not mean about a ton, or a yard about a yard.”
 If the seller wants a margin he must stipulate for it, or it must be recognised trade usage.
This was not found in the present case.

Weakness of traditional approach: In re Moore and Arcos have been criticised on the ground that the goods
tendered in both cases were perfectly suitable for the buyer’s purpose in both cases, suggesting that the buyers
rejected the goods tendered because their market price had fallen and the buyers wanted to get out of a bad
bargain.

Argument for restatement of law, to focus on the nature of the term:

Reardon Smith Line v Yngvar Hansen-Tangen [1976] 1 WLR 989
Holding Lord Wilberforce:
 Implying conditions into sale of goods contracts “excessively technical and due for fresh
examination”
 Better to treat sale of goods contracts in a similar manner to other contracts – ask whether
a particular item in a description constitutes a substantial ingredient of the “identity” of
the thing sold, and only if it does to treat it as a condition
 Cited Cehave N.V. v Bremer Handelsgesellschaft m.b.H. [1976]: Desirable that same legal
principles should apply to the law of contract as a whole; different legal principles should
not apply to different branches of law (i.e. differ from the law relating to performance of
other contractual obligations); “In principle it is not easy to see why the law relating to
contracts for the sale of goods should be different from the law relating to the performance
of other contractual obligations, whether charterparties or other types of contract. Sale of
goods law is but one branch of the general law of contract. It is desirable that the same
legal principles should apply to the law of contract as a whole and that different legal
principles should not apply to different branches of that law.”
 General law of contract has developed along “much more rational lines” in attending to the
nature and gravity of a breach rather than in accepting rigid categories which do or do not
automatically give a right to rescind
 Better to allow modern doctrine to infect sale of goods cases, rather than extend cases
under SGA
 FACTORS RELEVANT TO CLASSIFYING A TERM AS “CONDITION”
Focus remains on ascertaining parties’ intentions by “construing the actual contract itself in light of the
surrounding circumstances as a whole”:
Man Financial (S) Pte Ltd v Wong Bark Chuan David [2008] 1 SLR 663
Facts  Df was managing director of Pf, brokerage company
 Df told to resign with immediate effect
 Df was given termination agreement which contained non-solicitation and non-competition
clauses
 Df breached the clauses before he could receive promised compensation for compliance
with clauses.
Holding 1. Where STATUTE classifies a specific contractual term as a “condition”
 Where a statute or statutory provision classifies a specific contractual term as a
“condition”, then that term will be a condition
 Sale of Goods Act (Cap 393, 1994 Rev Ed) – classic statutory embodiment of the
condition-warranty approach inasmuch as it classifies various contractual terms as
conditions and warranties respectively
 Very specific factor – will not cover any terms that fall outside the statute or statutory
provision concerned

2. Where the CONTRACTUAL TERM itself expressly states that it is a “condition”

 Where the contractual term itself expressly states that it is a “condition”, then that
term would generally be held by CA to be a condition
 But express use of the word “condition” might not always render a term a condition in
law: L Schuler AG v Wickman Machine Tool Sales Ltd.
o But this case was more preoccupied with the consequences of the breach rather
than the nature of the term breached
o Criticized for adopting an effectively pre-nascent Hongkong Fir approach with its
focus on nature and consequences of breach
o Should not rewrite the clear intention of the parties for the term to be a
condition, pursuant to condition-warranty approach ought to take precedence)
o Supported by RDC order – 3(a) then 3(b)

3. The availability of a prior precedent

 Whether a prior precedent is available
 The Mihalis Angelos cited as authority for this factor: “"expected readiness" clause was
a condition on the ground, inter alia, that the same conclusion had been reached in by
its own previous decision”
 BUT
o Convenient, but does not really address the issue of principle. Still needs to be an
inquiry as to whether or not analysis and reasoning in prior precedent is sound in
principle.
o CA can depart from own prior decisions and free not to follow prior English (or
other foreign) decisions if unpersuasive or inapplicable in Singapore

4. Mercantile transactions
 Centres on importance placed on certainty and predictability in the context of
mercantile transactions
 Courts more likely to classify contractual terms as conditions in such contracts,
especially where they relate to timing (Bunge and The Mihalis Angelos)

In the final analysis

 Above factors not exhaustive; list is not closed to prevent from achieving certainty (rigidly)
at the expense of justice
 Actual decision depends very much on particular factual matrix
 No magic formula
UK:
BS&N Ltd (BVI) v Micado Shipping Ltd (Malta) (The “Seaflower” (No.1)) [2001] C.L.C. 421, [2001] 1 Lloyd’s Law
Rep 341 at [42]
Holding Waller LJ citing Chitty on Contracts (28th Edn), para 12-040:

The conclusion to be drawn from these cases is that a term 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 judicial decision (although it
has been said that some of the decisions on this matter are excessively technical
and are open to re-examination by the House of Lords);
(iii) if it is so designated in the contract or if the consequences of its breach, that is,
the right of the innocent party to treat himself as discharged, are provided for
expressly in the contract; or
(iv) if the nature of the contract or the subject-matter or the circumstances of the
case lead to the conclusion that the parties must, by necessary implication, have
intended that the innocent party would be discharged from further performance
of his obligations in the event that the term was not fully and precisely complied
with.

Otherwise a term of a contract will be considered to be an intermediate term. Failure to

perform such a term will ordinarily entitle the party not in default to treat himself as discharged
only if the effect of breach of the term deprives him of substantially the whole benefit which it
was intended that he should obtain from the contract’.

CLASSIFICATION
1. By construction of contract:
Bentsen v Taylor [1893] 2 QB 274 at 280-281
Holding Bowen LJ:
 Matter of construction as to whether a promise is a warranty (breach only sounds in
damages) or condition (breach gives right to terminate)
o “… that kind of promise the performance of which is made a condition precedent to
all further demands under the contract by the person who made the promise against
the other party - a promise the failure to perform which gives to the opposite party
the right to say that he will no longer be bound by the contract”
 Question is to be decided by looking at the contract in the light of the surrounding
circumstances and deciding which classification will best further the intention of the
parties, as gathered from the contract itself
 First thing to ask is: To what extent does the truth of what is promised be likely to affect
the substance and foundation of the adventure which the contract is intended to carry out
 Not looking at the effect of the breach which has taken place, but the effect likely to be
produced on the foundation of the adventure by the breach of the promise
Remarks In Singapore, adoption of this analysis by statute in the sale of goods context.

SGA, s 11(2): “Whether a stipulation in a contract of sale is a condition, the breach of which may
give rise to a right to treat the contract as repudiated, or a warranty, the breach of which may
give rise to a claim for damages but not to a right to reject the goods and treat the contract as
repudiated, depends in each case on the construction of the contract; and a stipulation may
be a condition, though called a warranty in the contract.”

Note the clumsiness of expressing a right to terminate a contract as amounting to a right to

treat the contract as having been repudiated.
Repudiation does not as such terminate a contract. Termination occurs only where the right to
repudiate the contract is exercised.

2. By statute:
Always mention SGA when question involves sale of goods.

Warranties
s 61(1) – In this Act, unless the context otherwise requires — "warranty" means an agreement with
reference to goods which are the subject of a contract of sale, but collateral to the main purpose of such
contract, the breach of which gives rise to a claim for damages, but not to a right to reject the goods and
treat the contract as repudiated.

12(2) – In a contract of sale, other than one to which subsection (3) applies, there is also an implied warranty that
—
(a) the goods are free, and will remain free until the time when the property is to pass, from any charge or
encumbrance not disclosed or known to the buyer before the contract is made; and
(b) the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other
person entitled to the benefit of any charge or encumbrance so disclosed or known.

12(3) – This subsection applies to a contract of sale in the case of which there appears from the contract or is
to be inferred from its circumstances an intention that the seller should transfer only such title as he or a third
person may have.

12(4) – In a contract to which subsection (3) applies, there is an implied warranty that all charges or
encumbrances known to the seller and not known to the buyer have been disclosed to the buyer before the
contract is made.

12(5) – In a contract to which subsection (3) applies, there is also an implied warranty that none of the
following will disturb the buyer’s quiet possession of the goods, namely —
(a) the seller;
(b) in a case where the parties to the contract intend that the seller should transfer only such title as a third
person may have, that person;
(c) anyone claiming through or under the seller or that third person otherwise than under a charge or
encumbrance disclosed or known to the buyer before the contract is made.”

Conditions
Whether condition is to be treated as a warranty, Section 11 SGA:
“11(1). Where a contract of sale is subject to a condition to be fulfilled by the seller, the buyer may waive the
condition, or may elect to treat the breach of the condition as a breach of warranty and not as a ground for
treating the contract as repudiated
11(2). Whether a stipulation in a contract of sale is a condition, the breach of which may give rise to a right to
treat the contract as repudiated, or a warranty, the breach of which may give rise to a claim for damages but
not to a right to reject the goods and treat the contract as repudiated, depends in each case on the
construction of the contract; and a stipulation may be a condition, though called a warranty in the contract”.

Implied conditions in sale of goods contracts:

Section 12(1) (seller’s right to sell) – In a contract of sale, other than one to which subsection (3) applies, there
is an implied condition on the part of the seller that in the case of a sale he has a right to sell the goods, and in
the case of an agreement to sell he will have such a right at the time when the property is to pass.

Section 13(1) (goods will correspond with description) – Where there is a contract for the sale of goods by
description, there is an implied condition that the goods will correspond with the description.

Section 14(2) (goods of satisfactory quality) – Where the seller sells goods in the course of a business, there is
an implied condition that the goods supplied under the contract are of satisfactory quality.

(2A) For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable
person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and
all the other relevant circumstances.
(2B) For the purposes of this Act, the quality of goods includes their state and condition and the following
(among others) are in appropriate cases aspects of the quality of goods:
(a) fitness for all the purposes for which goods of the kind in question are commonly supplied;
(b) appearance and finish;
(c) freedom from minor defects;
(d) safety; and
(e) durability.

(2C) The condition implied by subsection (2) does not extend to any matter making the quality of goods
unsatisfactory —
(a) which is specifically drawn to the buyer’s attention before the contract is made;
(b) where the buyer examines the goods before the contract is made, which that examination ought
to reveal; or
(c) in the case of a contract for sale by sample, which would have been apparent on a reasonable
examination of the sample.

Section 14(3) (goods reasonably fit for buyer’s particular, disclosed, purpose) – Where the seller sells goods in
the course of a business and the buyer, expressly or by implication, makes known —
(a) to the seller; or
(b) where the purchase price or part of it is payable by instalments and the goods were previously
sold by a creditbroker to the seller, to that credit-broker,
any particular purpose for which the goods are being bought, there is an implied condition that the goods
supplied under the contract are reasonably fit for that purpose, whether or not that is a purpose for which
such goods are commonly supplied, except where the circumstances show that the buyer does not rely, or that
it is unreasonable for him to rely, on the skill or judgment of the seller or credit-broker.

Section 15(2) (bulk of goods will correspond with sample in quality) – In the case of a contract for sale by
sample, there is an implied condition —
(a) that the bulk will correspond with the sample in quality;
(b) (Deleted by Act 43/96)
(c) that the goods will be free from any defect, making their quality unsatisfactory, which would not
be apparent on reasonable examination of the sample.

Restricting non-consumer buyer’s right to unreasonably reject goods for slight breach, Section 15A SGA:
“15A(1). Where in the case of a contract of sale —
(a) the buyer would, apart from this subsection, have the right to reject goods by reason of a breach
on the part of the seller of a condition implied by section 13, 14 or 15; but
(b) the breach is so slight that it would be unreasonable for the buyer to reject them,
then, if the buyer does not deal as consumer, the breach is not to be treated as a breach of condition but may
be treated as a breach of warranty.
15A(2). This section applies unless a contrary intention appears in, or is to be implied from, the contract.
15A(3). It is for the seller to show that a breach fell within subsection (1)(b)”.
i.e. Remedies for breach of condition in non-consumer cases modified

Cehave N.V. v. Bremer Handelsgesellschaft m.b.H. (The “Hansa Nord”) [1976] Q.B. 44
Facts  Two contracts were made for 6000tons of citrus pulp pellets.
 Clause 7 provided that ‘shipment to be made in good condition’.
 The buyers paid the price, obtained the shipping documents but when the goods were
discharged at the destination port, part of shipment had been damaged by overheating.
 Buyers rejected the whole shipment and when sellers refused to refund the price, buyers
applied to court, who ordered shipment to be sold.
 Shipment was bought for 30% of original contract price by third party, who sold it to buyers
for the same price. Buyers used it for the same purpose.
Holding Held that since the whole cargo was used for its intended purpose, there was no fundamental
breach. Buyers’ only remedy was in damages because the term was an intermediate stipulation,
 and they were not entitled to reject, and goods were of “merchantable quality” within s 14(2)
of UK SGA.

 “Shipment to be made in good condition” not a condition.

 S 11 SGA does not compel courts to treat all terms in a sale of goods contract as either a
condition or warranty.
 Preservation of common law by s 62 SGA unless inconsistent with SGA.
 Thus, Courts may hold some terms in a sale of goods contract to be “intermediate” terms.

3. By judicial precedent:
Bunge Corporation v Tradax Export SA [1981] 1 WLR 711 (BBF 576)
Facts  The sellers were required, by 30 June 1975, to load the goods on board a ship at a single
United States Gulf port nominated by them.
 The contract further provided that the buyers should give the sellers “at least 15
consecutive days’ notice of probable readiness of vessel(s) and of the approximate quantity
required to be loaded.”
 The buyers did not give notice until 17 June, by which time less than 15 days of the loading
period remained.
 The sellers declared the buyers to be in default and claimed damages for the repudiation
of the contract on the ground that the term as to notice was a condition.
Holding HL held that clause was a condition. Sellers entitled to terminate and claim damages.

 HL held that Hong Kong Fir analysis unsuitable for breach of time clauses as there is only
one consequence – to be late. The present was a mercantile contract “totally different in
character”.
 Cannot apply Hongkong Fir analysis because
o This would “fatally remove” the “most indispensable quality of mercantile contracts”,
certainty (because it would make it difficult or impossible to know whether seller
could provide goods after a delay)
o Despite late notifications/delay, would confine the seller to only a remedy in damages,
which is difficult to quantify
 Time clauses are normally conditions and in order for a term to be classified as a condition,
it was NOT NECESSARY that breach would always deprive the innocent party of substantially
the whole benefit of the contract.
o Precedents on the similar time terms and predominant commercial parties favour its
classification as a condition
o Obligations of seller and buyer interdependent (the sellers would not know which port
to go to, where to deliver the goods until buyer gave seller notice)
o Place a great burden upon seller if seller is required to prove that there is a serious
consequence (because time needed to ready goods varies) which is why Court said that
parties have provided for a clear space and time.
Remarks How useful is Bunges as a precedent?

SGA s 10 Stipulations about time

(1) Unless a different intention appears from the terms of the contract, stipulations as to
time of payment are NOT of the essence of a contract of sale.
(2) Whether any other stipulation as to time is or is not of the essence of the contract
depends on the terms of the contract.
(3) In a contract of sale, “month” prima facie means calendar month.

The Mihalis Angelos [1971] 1 QB 164 (BBF 572)

Facts o Charter of a vessel, clause stating that vessel was ‘expected ready to load under this charter
about 1 July 1965’.
o Vietnam war broke out and charterer did not have goods to ship, tried to find ways to
repudiate contract.
 o Owner of ship could not reasonably have expected that ship would be ready to load because
ship was out at sea at that time.
Holding Held, charterer entitled to rely on breach of condition, despite having given invalid reason.
Motivation to terminate irrelevant because (Megaw LJ):
i) Certainty in the law
 “It is surely much better, both for shipowners and charterers … to be able to say
categorically: "If a breach is proved, then the charterer can put an end to the contract,"
rather than that they should be left to ponder whether or not the courts would be
likely, in the particular case…to decide that in the particular circumstances the breach
was or was not such as "to go to the root of the contract." Where justice does not
require greater flexibility, there is everything to be said for, and nothing against, a
degree of rigidity in legal principle.”
ii) No injustice to shipowner who made statement without reasonable grounds or dishonestly
because shipowner ought reasonably to have known ship’s location
iii) Precedent: Numerous established binding authorities which held that a clause “expected
ready to load” is a condition.

Time is a condition because it is of essence in commercial contracts:

Hartley v Hymans [1920] 3 KB 475
Facts  Pf agreed to sell Df cotton yarn, in specified quantities at specified intervals and all
deliveries were supposed to be completed by 15 November 1918.
 Pf was late in his deliveries and fell short of the specified quantities each time.
 Df complained by his letters of the delay but still accepted the late deliveries, thereby
leading Pf to believe that contract still subsisted.
 On 13 March 1919, Df, having given no previous notice requiring delivery in any reasonable
time, wrote to Pf cancelling order and refused to accept subsequent deliveries.
 Pf sued Df for damages for refusing to take the remainder of the yarn.
Holding Pf’s claim allowed.

Per McCardie J: “In ordinary commercial contracts for the sale of goods the rule clearly is that
time is prima facie of the essence with respect to delivery.”

When time is of the essence of the contract

 A vendor who has failed to deliver within the stipulated period cannot prima facie call upon
the buyer to accept deliver after that period has expired
 He himself has failed to fulfil the bargain
 The buyer can plead the seller’s default and assert that he was not ready and willing to carry
out his contract

In this case
 Df had waived the condition that the good should be delivered by 15 November by way of
their letters (even though letters were written after 15 November). Thus Df debarred from
asserting that the condition was still operative and binding and insist on original terms.
 Df estopped from saying that period for delivery expired on 15 November or from asserting
that contract ceased to be valid on that date. Letter and conduct had led Pf to believe that
contract was still subsisting and Pf had acted on that belief at serious expense to himself.
 Letters imply a new agreement that the contract period should be extended beyond 15
Novermber. Delivery may take place within a reasonable time of which notice is to be given
by the buyer to the seller.

4. As condition in mercantile context:

 As follows from the previous (time is of the essence), courts are more likely to classify terms as conditions
in mercantile transactions
 For the importance of commercial certainty and predictability
 Especially where they relate to timing (see above at Bunge, MIhalis Angelos)
Bunge Corporation New York v Tradax Export SA [1981] 1 WLR 711
 Holding  Lord Wilberforce: “In conclusion, the statement of the law in Halsbury's Laws of England …
appears to me to be correct, in particular in asserting (1) that the court will require precise
compliance with stipulations as to time wherever the circumstances of the case indicate
that this would fulfil the intention of the parties, and (2) that broadly speaking time will be
considered of the essence in "mercantile" contracts … The relevant clause falls squarely
within these principles, and such authority as there is supports its status as a condition… In
this present context it is clearly essential that both buyer and seller (who may change roles
in the next series of contracts, or even in the same chain of contracts) should know precisely
what their obligations are”.
Note: Show how there is a mercantile context by analogising.

5. As condition by parties’ agreement:

L Schuler AG v Wickman Machine Tools Sales Ltd [1973] 2 All ER 39 (BBF 599)
Facts  Df was appointed sole distributor of Pf’s panel presses in the UK for a period of 4.5 years.
 Clause 7(b) of the agreement provided that “It shall be a condition of this agreement that
(i) [Wickman] shall send its representatives to visit [the six large UK motor manufacturers]
at least once in every week for the purpose of soliciting orders for panel presses…”
 Clause 11(a) provided that either party might determine the agreement by notice in writing
if “(i) the other shall have committed a material breach of its obligations hereunder and
shall have failed to remedy the same within sixty days of being required in writing so to
do…”
 Df failed to make weekly visits on a few occasions; Pf terminated agreement immediately,
claiming that Df was in breach of a condition under clause 7(b).
Holding Appeal dismissed that cl 7 was not a condition such that breach would entitle the innocent party
to terminate the whole contract forthwith

Lord Reid
 Condition has acquired a precise legal meaning but it is frequently used with a less
stringent meaning by laymen
 But courts are seeking parties’ intention as disclosed by the contract as a whole, therefore …
“Use of the word ‘condition; is an indication - even a strong indication - of such an intention
but it is by no means conclusive. The fact that a particular construction leads to a very
unreasonable result must be a relevant consideration. The more unreasonable the result,
the more unlikely it is that the parties can have intended it, and even if they do intend it
the more necessary it is that they shall make that intention abundantly clear.”
 This case
o Pf claimed that cl 7 stands alone (not subject to the 60 days waiting period in cl 11)
because it is expressly described as a condition
o But Pf’s claim that cl 7 stands alone would give very unreasonable results (“failure to
make even one visit entitle them to terminate the contract however blameless
Wickman might be”)
o If cl 7 is read with cl 11, then the unreasonableness disappears. The word “condition”
would make any breach of cl 7 a material breach, allowing Pf to effect cl 11 and Df to
respond. This would be a reasonable and possible construction of the contract
o Thus, Lord Reid found that cl 7 was not a condition because it would have had an
unreasonable result (also said draftsman was unskilled and should not place too much
importance on natural meaning)

Lord Wilberforce (dissenting)

 Issue: “whether it is open to the parties to a contract, not being a contract for the sale of
goods, to use the word 'condition' to introduce a term, breach of which ipso facto entitles
the other party to treat the contract at an end.”
 Found cl 7 a condition because to assume otherwise would be to think “that both parties
to this contract adopted a standard of easygoing tolerance rather than one of aggressive,
insistent punctuality and efficiency” [but draftsman?]
  Further, treating it as merely a term would leave Pfs without remedy (which is unlikely what
the parties intended) [but not true, because cl 11 gave time for Dfs to remedy alleged
breach]
Remarks Big Mac: Not authority for proposition that word ‘condition’ may not mean condition legally. In
this case, the contract was badly drafted, and in a well-drafted contract, generally no difficulty.

Criticised by SGCA in Man Financial at [167], criticism supported by post-Schuler HL decisions

(Bunge) as cited in RDC at [110]:
“At first blush, the approach adopted by the majority in Schuler is not a wholly untenable one.
After all, it is true that the same word (here, “condition”) can take on different meanings
depending on the context in which it is used. With respect, however, a close analysis of the
reasoning of the majority in Schuler demonstrates a preoccupation with the consequences of
the breach of contract in that case, rather than a focus (in accordance with the condition-
warranty approach in Situation 3(a)) on the nature of the term breached. Indeed, there is a
reference by Lord Kilbrandon (who was one of the majority judges) to the “grotesque
consequences” (id at 272) of holding the term breached to be a “condition” in the strict legal
sense of the word.
It is our view that the majority of the House in Schuler were, in substance and effect, applying
the Hongkong Fir approach instead (which, it will be recalled, falls under Situation 3(b) and,
more importantly, relates to the actual nature and consequences of the breach instead). Indeed,
there is a very powerful (and, in our view, persuasive) dissenting judgment by Lord Wilberforce
(see Schuler at 262–263), who warned against rewriting, in effect, what was the clear intention
of the contracting parties that the term concerned be a “condition” in the strict legal sense of
the word (in accordance with the substance and spirit of the condition-warranty approach
under Situation 3(a)).”

How do you remedy past events? Lord Reid concluded that breach could be remedied by
prevent future recurrence.

Therefore, although under certain special circumstances express wording may not be conclusive, this factor is
probably the strongest and therefore most useful guidelines, and that in most situations, the court would
probably find that the express wording accurately reflects the intention of the contracting parties, despite
the Schuler case.

VI. SITUATION 3(B): INTERMEDIATE/INNOMINATE TERM APPROACH

 RDC restatement meant that warranties were no longer strictly excluded from the right to terminate, as
long as the breach gave rise to sufficiently serious consequences (3b).
 This addressed the problem of injustice in the traditional condition-warranty approach (Lord Reid, Schulere)

But pre-RDC legal position that reconciled both condition-warranty and Hongkong Fir:
HL decision in Bunge suggests (particularly Lord Roskill) a hybrid approach
1) Lord Scarman: “Upon the true construction of a stipulation and its contract, is the stipulation a condition,
innominate term or only a warranty? … Unless the contract makes it clear by express provision or necessary
implication arising from its nature, purpose and circumstances that the stipulation is a condition or only a
warranty, it is an innominate term which remedy depends on the nature, consequences and effect of the
breach. (717) Courts must first determine if the term is a condition. BUT this is rejected because the
reference to the notion of a “warranty” would be a wholesale application of the condition-warranty
approach, making it extremely difficult to apply the Hongkong Fir test thereafter.
2) Lord Roskill: The Hongkong Fir approach cannot be considered as the sole test for the relative importance
of terms for the purpose of rescission. (725-726) … While recognizing the modern approach and not being
overready to construe terms as conditions unless the contract clearly requires the court to do so, none the
less the basic principles of construction for determining whether or not a particular term is a condition
remains as before, always bearing in mind on the one hand the need for certainty and on the other the
desirability of not, when legitimate, allowing rescission where the breach complained of is highly technical
and where damages would clearly be an adequate remedy.
 Hongkong Fir approach Condition-warranty approach
Focus is on the event that constitutes the breach Focus is on the nature of the term itself
of contract; nature and consequences that result
from the breach

Directly opposes condition-warranty approach.

Generates fairness but no commercial certainty Generates commercial certainty and
and predictability, in a situation of no overlap predictability but no fairness, in a situation of no
overlap
Must wait and see what consequences are.
Furthermore, deciding whether a consequence is
serious enough to entitle termination is
subjective. If party terminates when he thinks he
has a right but when he actually doesn’t (by
Courts’ standard), he will be found in
repudiatory breach. Other party will then have
right to terminate and sue for damages.
Consequentialist in nature: Looks to intention of Non-consequentialist: Looks to intention of
parties with regards to benefit the innocent parties as to the degree of importance to be
party is to have placed on the term itself (condition or
warranty?)
Will not apply if parties agree as to the
classification of the term concerned (freedom of
contract). > Situation 3a
Applies only regarding innominate terms (which
may cause either serious or trivial consequences)
i.e. Situation 3b v Situation 3a

 RDC: “…an intermediate term is defined as one which is neither a condition nor a warranty simply because
a breach of it could give rise to either very substantial or to very trivial consequences.”
 A 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 the consequences
 Thus, where an intermediate term has been breached, the aggrieved party has a right to terminate only if
such breach deprives the aggrieved party of “substantially the whole benefit which it was the intention
of the parties as expressed in the contract that he should obtain as the consideration for performing those
undertakings” (Lord Diplock in Hong Kong Fir)
o Lord Wilberforce citing support for the less stringent interpretation of “condition” in Schuler at 262: It
is not necessary for parties to a contract, when stipulating a condition, to spell out the consequences
of breach: these are inherent in the (assumedly deliberate) use of the word: Suisse Atlantique Société
d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967] 1 A.C. 361 , 422, per Lord
Upjohn.

BEFORE RDC
Existence of innominate terms:
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha [1962] 2 QB 26 (BBF 567)
Facts  Contract for hire of vessel for 24 months.
 Seaworthy clause: ship to be “fitted in every way for ordinary cargo service”.
 Ship was unseaworthy (engine was old and operation needed supervision, but engine room
under-staffed, and workers were inefficient).
 As a result, repairs had to be carried out on the way to Osaka (30 days off-hire), and after
the ship’s arrival there, it took a further 15 weeks for repairs to be carried out on the engine.
 This left a total of 17 months during which she could be available to charterers. There had
been a steep fall in freight rates since the date of the charter, and the charterers purported
to terminate.
  At first instance, Salmon J held that the ship was unseaworthy but that the charterers were
not entitled to terminate the charter on account of the seaworthiness of the ship. The
charterers appealed to the Court of Appeal.
Holding The seaworthiness of the vessel was not a condition.

Sellers LJ:
 “It would be unthinkable that all the relatively trivial matters which have been held to be
unseaworthiness could be regarded as conditions of a contract or conditions precedent to
a charterer’s liability and justify in themselves a cancellation or refusal to perform on the
part of the charterer.”
 But went on to conclude that clause was a warranty, not condition
 Dismissed the appeal

Upjohn LJ:
 Contrary to common sense to suppose that parties contemplated that the charterer should
be entitled to treat contract terminated for trifling breaches such as missing nails, anchors
not on board etc.
 Open to parties to a contract to make it clear either expressly or by necessary implication
that a particular stipulation is to be regarded as a condition which goes to the root of the
contract. This is matter to be determined on interpretation of the contract.
 However, where on true construction of the contract, parties did not make this particular
stipulation a condition, it is unsound and misleading to simply conclude that it is therefore
a warranty and damages are a sufficient remedy.
 Remedies open to the innocent party for a breach of a stipulation which is not a condition
should depend entirely upon the nature of the breach and its foreseeable consequences.
Question then is does the breach go to the root of the contract or make further
performance impossible? If yes, party can treat the contract as at an end (fundamental
breach); if not, his claim sounds only in damages. (see above)
 On construction, clause was not a condition. Similarly, unseaworthiness, although serious,
did not go to the root of the contract.
 Dismissed the appeal

*Lord Diplock:
 Where an event occurs the occurrence of which neither the parties nor Parliament have
expressly stated will discharge one of the parties from further performance of his
undertaking, the test is: does the occurrence of the event deprive the party who has
further undertakings still to perform of substantially the whole benefit which it was the
intention of the parties as expressed in the contract that he should obtain as the
consideration for performing those undertakings?
 “There are, however, many contractual undertakings of a more complex character which
cannot be categorised as being "conditions" or "warranties," … Of such undertakings all that
can be predicated is that some breaches will and others will not give rise to an event which
will deprive the party not in default of substantially the whole benefit which it was intended
that he should obtain from the contract … the legal consequences of a breach of such an
undertaking, unless provided for expressly in the contract, depend upon the nature of the
event to which the breach gives rise and do not follow automatically from a prior
classification of the undertaking as a "condition" or a "warranty."
 Here, scope of “unseaworthiness” was very large. Solution is hence not to consider whether
clause was a condition or warranty, but rather to consider the effects.
 Trial judge therefore rightly considered the relevant factors, i.e., whether Df had taken
steps to remedy the delays due to incompetence of engine-room staff and repairing of
engine, before concluding that Pf was NOT deprived of substantially the whole benefit it
was intended that he should obtain
 Dismissed the appeal
Remarks  Essentially, term could have been broken in a trivial or fundamental manner. Distinction
between consequences of condition and warranty was too stark.
  Must judge the contract holistically with reference to the whole benefit of the contract. Just
because it is substantial doesn’t mean it is a substantial to the whole.
 Contracts are made to be performed and not to be avoided according to the winds of
market fluctuation. Courts generally prefer interpretation which will be conducive to
contract performance.

Innominate term but NOT allowed to terminate:

The Hansa Nord [1975] 3 All ER 739 (see above for facts)
Holding Not allowed to terminate, no fundamental breach. Only entitled to damages.

Lord Denning:
 Clause was not expressly classified by parties as a condition and neither was there any
authority under common law to suggest that it was. Thus, CA concluded that it was an
innominate term.
 Small-scale deviations from contractual standard (as was the case here, since buyer used
for original purpose in the end) should be met by a price allowance. Buyers should not have
a right to reject the whole cargo unless the deficiency was serious and substantial.

Roskill LJ:
 Court should not be over ready, unless required by statute or authority to find that a term
is a condition.
 Contracts are made to be performed and not to be avoided according to the whims of
market fluctuations. Where there is free choice between two possible constructions, Court
should prefer the one that will ensure performance.

Ormrod LJ:
“the stipulation in cl 7 that the goods were to be shipped in good condition was not a condition …
on the facts of this case the breach did not go to the root of the contract, and that consequently,
the buyers were not entitled to reject the goods”

Note: Motive for wanting to terminate here was because original contract price was £100k but
had dropped to £86k when goods arrived. Buyers were trying to get out of a bad bargain.

Innominate term but ALLOWED to terminate. Renunciation or repudiatory breach going to “root of contract”,
depriving charterers of substantially the whole benefit of the contract:
Federal Commerce and Navigation v Molena Alpha Inc (The “Nanfri”) [1979] AC 757
Facts  Charter party contract. Payments not timely made.
 Owners of vessel announced threatened breach; instructed masters to issue “claused” bills
of lading instead of bills with “freight pre-paid”.
 Term breached not a “condition”; innominate term.
Holding  Since the signing of the pre-paid bills was essential to the charterers’ trade, the owners’
instruction constituted an anticipatory breach of contract which in the circumstances
amounted to a repudiatory breach.
 This was because the threatened breach went to the “root of contract” and would
effectively deprive charterers of substantially the whole benefit of the contract (serious
consequences – charterer would suffer severe commercial embarrassment and be out of
business).
 Also a case showing that where a party performs in a manner that is not consistent with the
terms of the contract, it is no defence for that party to show that he acted in good faith.

*Rare occasion where Court held that breach of innominate term gave rise to right to terminate.

AFTER RDC
The RDC case envisages a 2 stage test:
1) Term is not a ‘condition’ or an ‘expressly intended warranty’
 o If it is, innocent party can elect to treat contract as discharged, regardless of nature of consequences
of breach.
o Hongkong Fir approach can be applied only if the older “condition-warranty” approach is applied in
the modified manner (inquiry is only as to whether the term concerned is a condition). If the term
considered is not a condition, it is automatically a warranty, leaving no room for the Hongkong Fir
approach to apply.
2) Ascertaining consequences of the breach
o Sufficiently serious so as to ‘deprive [innocent party] of substantially the whole benefit it was
intended to obtain from the contract’? i.e. terminate the contract. A factual inquiry by the
court/largely dependent on factual matrix. (Sports Connection at [62])

Application locally in CA:

Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd [2009] SGCA 34
Facts Df bought sand from Pf. Contract required minimum order and prompt payment. Df consistently
under-ordered and paid late. Pf wanted to terminate.
Holding No termination. RDC Concrete’s Situation 1 and 2 doesn’t apply. 3A doesn’t apply because
prompt payment is not a condition. 3B doesn’t apply because substantial benefits were not lost.

 3(a) not applicable: Not a condition; time was not “of the essence” in the contract. Looking
at the contract as a whole, found that parties did not intend any breach of the Terms of
Payment clause (regardless of the seriousness of the consequences flowing from the
breach) would entitle the aggrieved party to terminate the contract without more ([54])
o Note that a party cannot unilaterally vary the terms of the contract by turning what
was previously a non-essential term into an essential term ([56])
o i.e. could not have given notice to make time a condition in respect of a breach of a
non-essential term. Therefore party giving notice can only terminate when the failure
of the other party to comply with the terms of the notice goes to the root of the
contract and substantially deprives … etc
o This failure to comply is evidence of repudiatory breach, but not breach per se
 Turning to Situation 3(b), clear that failure by Df to pay arrears due did not deprive Pf of
substantially the whole benefit of the contract that it was intended that the Pf should obtain

Locally in HC:
*Cousins Scott William v The Royal Bank of Scotland plc [2010] SGHC 73
Facts  Pf was employed by Df.
 Employment terminated, Pf signed redundancy agreement.
 A clause in the Redundancy Agreement stated that Pf agreed to observe confidentiality
obligations which he undertook when he joined the Df.
 Thereafter, Pf proceeded to send two emails containing confidential documents to his
personal email. Df discovered and summarily dismissed him.
 Df rescinded Redundancy Agreement because of the breach. Pf sued.
Holding [61]-[65] Steven Chong JC:
 Inquiry for whether breach had deprived Df of substantial benefit of the agreement is
focused on actual loss, not potential loss of the breach. Wait and see approach as laid out
in RDC
 Pf did not substantially breach the agreement, and his breach did not deprive the Df of
substantially the whole benefit of the agreement
 His actions caused no loss to the Df since he subsequently deleted the two emails when
instructed to do so by Df
 The breach was not repudiatory in nature so as to entitle Df to terminate the agreement;
only entitles him to damages
 “Whether a breach of a confidentiality cl can amount to a repudiatory breach of a
redundancy agreement can only be answered by reference to the terms of the agreement
and the effect of the breach.”

Court applied the situations set out in RDC Concrete (note – focus for this case in Situation 3(b)):
 1) No express provision for the right of termination: Df’s submitted that the right of
termination under the employment contract was incorporated into the Redundancy
Agreement because the Redundancy Agreement referred to the confidentiality obligation
under the employment contract. Court held that a mere acknowledgement of the
continued observance of the obligation is insufficient, because there is no “clear and
explicit incorporation”.
2) No renouncement
3) a – No condition: The purpose of the Redundancy Agreement was to secure the
termination of the employment contract. There was no reference to the confidentiality
obligation in the covering letter enclosing the agreement. As such, acknowledgement of the
obligation cannot be characterised as a condition.
b – see above.

Odd outcome: Employer’s early discovery precluded his right to terminate.

Sembcorp Marine Ltd v PPL Holdings Pte Ltd and another and another appeal [2013] SGCA 43
Facts  Parties were joint venture partners who each owned half of PPL Shipyard. Main case was
about disputed terms affecting Df’s board influence and executive control over PPL
Shipyard
 But Pf also submitted that Df breached an obligation of confidentiality under the Joint
Venture Agreement as a result of its director’s disclosure of PPL Shipyard’s accounts to the
third party
 Issue: Did the breach justify termination of the joint venture agreement?
Holding Sundaresh Menon CJ at [136]-[138]:
 The clause was not “so important that any breach, regardless of the actual consequences
of such a breach, would entitle the innocent party to terminate the contract” (RDC [97])
i.e. Not a condition, 3a does not apply
o No intention evinced by either party that breach of confidentiality clause would have
entitled termination even if the information had not been circulated
 Nor would an alleged breach have “given rise to an event which will deprive the party not
in default of substantially the whole benefit which it was intended that he should obtain
from the contract” (RDC [99]) i.e. 3b does not apply
o Even if such a breach would have occasioned the destruction of the relationship of
trust and confidence between the parties (which formed the basis of the parties’
joint venture), this would have to be predicated on the factual premise that there
was a wilful and deliberate disclosure of such confidential information by a party.
But there was no such finding
o Only a failure by Df to instruct its employees, which would not have deprived …
whole benefit i.e. mere failure =/= wilful and deliberate disclosure

VII. SITUATION 1: EXPRESS TERMINATION CLAUSES

Example: RDC v Sato Kogyo and its express termination clause at [8]
 “In the event that your supply is unable to meet LTA’s requirements, or you are unable to continue your
supply, Sato Kogyo (S) Pte Ltd reserves the right to terminate your contract and retain and use both the
retention sum and any outstanding payment due to you to seek for alternative source of supply. In
addition, Sato Kogyo (S) Pte Ltd also reserves the right to seek from you any direct cost incurred due to
your non-compliance.”

Chua Chian Ya v Music & Movements [2010] 1 SLR 607

Facts  Clause 10 in contract provided for “a statement of all accounts” to be “provided and
delivered” to Pf by Df.
 Clause 12 provided, inter alia, that in the event that Df fails to account and make payment
or fails to perform any obligations required under the contract and in the event that such
failure is not cured within 30 days after written notice is served on the Df, Pf “may elect to
cancel or terminate [the] agreement without prejudice to any rights or claims it may have”.
 o “In the event that the Publisher fails to account and make payment hereunder or fails
to perform any obligations required hereunder and in the event that such failure is
not cured within thirty (30) days after written notice has been served on the Publisher,
or in the event that the Publisher becomes inactive, ceases doing music publishing
business or ... [goes] into compulsory liquidation or bankruptcy, then and in any such
events the Writer, in addition to such other rights or remedies which it may have at
law or otherwise under this agreement, may elect to cancel or terminate this
agreement without prejudice to any rights or claims it may have, and then all right[s]
in and to the Composition[s] ... shall revert to the Writer and the Publisher may not
thereafter exercise any rights hereunder.”
Holding  Nothing to show that statements of accounts were provided by M&M
 Hence, clear breach of clause 10 which entitled Pf to terminate agreement pursuant to
clause 12
 Clause 12 was a clear example of an express termination clause which falls under RDC
Situation 1

However, Courts do not always give weight to an express termination clause:

Rice v Great Yarmouth BC (The Times 26/7/2000)
Facts  Df awarded contract to Pf to maintain its several facilities.
 Pf had to borrow substantial sums to invest in equipment and to considerably increase his
workforce.
 Df issued numerous default notices before terminating the contract and withholding
payments due.
 Pf sued for sums due and damages for wrongful termination.

Clause in question:
‘If the contractor: 23.2.1 commits a breach of any of its obligations under the Contract; … the
Council may, without prejudice to any accrued rights or remedies under the Contract, terminate
the Contractor's employment under the Contract by notice in writing having immediate effect’.
‘If the Contractor's employment is terminated as provided in Condition … 23.2 and is not
reinstated, the Council shall: 23.3.1 cease to be under any obligation to make further payment
until the costs, loss and/or damage resulting from or arising out of the termination of the
Contractor's employment shall have been calculated and provided such calculation shows a
sum or sums due to the Contractor…’
Holding Hale LJ:
 “The notion that this term would entitle the council to terminate a contract such as this at
any time for any breach of any term flies in the face of commercial common sense”
o “The difficulty with that argument is that this is a classic example of an innominate
term: one which can be broken in so many different ways and with such varying
consequences that the parties cannot be taken to have intended that any breach
should entitle the innocent party to terminate the whole contract.”
o “The problem with the council's argument in this case is that clause 23.2.1 does not
characterise any particular term as a condition or indicate which terms are to be
considered so important that any breach will justify termination. It appears to visit
the same draconian consequences upon any breach, however small, of any
obligation, however small.”
 i.e. Giving effect to the express termination clause would be unfair, unreasonable
 Judge should have first considered which terms had been broken and whether they were
such important terms as to give rise to a right to terminate

Distinguishing factor: Does the clause give effect to parties’ intentions?

Fu Yuan Foodstuff Manufacturer Pte Ltd v Methodist Welfare Services [2009] 3 SLR 925
Facts Df contracted with Pf to provide catering services. Cl 3.2 permitted Df to terminate contract
without notice should Pf breach, inter alia, cl 2.7. Pf employed 6 foreign workers who were
illegally deployed at Df’s premises.
 Cl 2.7.2 stated that Pf “shall comply with all Singapore laws and regulations, especially with
regard to food establishments and employment of staff”.
Holding Pf failed to comply with Singapore’s employment law and breached cl 2.7.2, which entitled Df
to terminate contract with immediate effect pursuant to cl 3.2.
 Case fell squarely within RDC Situation 1 – since there was a breach of cl 2.7.2 of the
agreement, the right to terminate immediately arose pursuant to cl 3.2
 Distinguished from Rice
o Unlike in Rice, Court gave full effect to the termination clause concerned because
it in fact reflected the parties’ intentions
o Termination clause was consistent with the commercial reality between the
parties which centred on their desire to comply with the employment laws of
Singapore, being a charitable organisation
o Hence, since giving effect to the literal language of the clause (where any breach
would justify termination) is wholly consistent with the intentions of the parties
as ascertained from the context concerned, there was no need to ‘read down” the
contract (as in Rice, where a literal interpretation flouted commercial common
sense)

“Loss of Bargain” Damages

 Right to terminate arising from express termination clause – no recovery of loss bargain damages
 Right to terminate arising from common law and termination clause (i.e. repudiatory breach) – can recover
for loss bargain damages
Sports Connection v Deuter Sports GmbH [2009] 3 SLR(R) 883
Facts  Pf was exclusive distributor of Df’s products.
 In a distributorship agreement, parties agreed on a non-competition clause which
prevented Pf from selling products in competition with Df’s range of products without prior
consent from Df.
 Parties agreed that this clause would not be activated as long as Pf purchased US$1m worth
of Df’s products annually.
 In 2004, Pf failed to meet this purchase target and Df activated non-competition clause.
 In 2005, Df terminated contract on ground that Pf had sold competing products without its
consent.
 Pf accepted that it was in breach of the clause but contended that the breach was not so
serious as to entitle Df to terminate agreement.
Holding Situation 1 mentioned in discussion of RDC approach – not applicable in facts of case though
(no express termination clause)
 Situation 1 entails same legal effect as a condition (Situation 3(a))
 However, this is only with regard to termination of the contract
 Does not necessarily mean that, from a remedial perspective, the innocent party is also
entitled to the full measure of damages if there has, in fact, been no breach which would
have entitled it to terminate the contract at common law
 Even if the contract itself stipulates recoverable damages, the term concerned might still
be unenforceable as constituting a penalty clause (Financings, Lombard)

Decision
 Non-competition clause was not a condition
 Parties had no intention of treating it as a condition inasmuch as any breach of it, regardless
of seriousness of the consequences of the breach concerned, would entitle Df to terminate
the distributorship agreement (3a)
 Df had always known throughout that Pf was selling competing products and had
acquiesced to it
 Rather, central aim and focus of the clause was to encourage and incentivise Pf to reach
the purchase target
 Court went on to consider if Df has been deprived of substantially the whole benefit it was
intended that it should obtain from the distributorship agreement, assessing the actual
consequences of the breach of the non-competition clause (3b)
  Consequences were two-fold – amount of purchases by Pf dropped from over US$1m to
US$788k and objectives of “market penetration” and “high quality brand positioning”
possibly compromised
 On the facts, Court held that there was no substantial deprivation of benefit on either
ground

Further local application:

*Tan Wee Fong and others v Denieru Tatsu F&B Holdings (S) Pte Ltd [2010] 2 SLR 298
Facts  Pf purchased from Df right to operate franchise, signed a Country Master Partner
Agreement (CMPA) and a Confidentiality and Non-Competition Agreement (CNCA).
 Pf had to pay Df upfront fee of US$205,000 under cl7.1 of CMPA.
 Clause 9.4 of CMPA conferred on Df right to terminate franchise agreement pursuant to a
breach of CNCA and provided that upon termination, fees already paid to Df would be non-
refundable.
 Clause 4 of the CNCA was a non-solicitation clause restraining Pf from attempting to employ
or soliciting for the employment of any of Df’s employees.
 Pf solicited Df’s staff and Df terminated the CMPA.
 Pf sued Df for wrongful termination, denying they were in breach.
Holding Difference in remedial consequences compared to other situations, under two scenarios:
1) Party terminates pursuant to express contractual provisions but has no concurrent right to
terminate at common law
 Only remedy available to aggrieved party is recovery of damages for unperformed
accrued obligations up to date of termination
 Aggrieved party is not entitled to claim loss of bargain damages having terminated
pursuant solely to an express contractual provision to do so
 See Financings Ltd v Baldock
2) Party who had terminated pursuant to express contractual provisions had a concurrent
right to do so under the common law
 Entitled to recover loss of bargain damages
 See Lombard North Central Plc v Butterworth

Summary from Chitty on Contract

“Thus, where a contracting party terminates further performance of the contract pursuant to a
term of the contract, and the breach which has caused it to exercise that power is not a
repudiatory breach, the party exercising the right to terminate may only be entitled to recover
damages in respect of the loss which it has suffered at the date of termination and not for loss
of bargain damages. Where, however, the breach 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 party's repudiation of the contract.”
Remarks Decision of case (not important)
 It must be remembered that the designation of a term as a condition or the use of
 words to similar effect would not invariably (although it would usually) lead to the
conclusion that the term was a condition. In determining whether or not a particular term
was a condition, the court would ascertain the objective intention of the parties themselves
by construing the actual contract in the light of the surrounding circumstances as a whole.
 A term is not automatically classified as a condition simply because the contracting parties
have agreed to a right to terminate upon breach of a particular term; something more is
required for the court to reach this conclusion. It bears repeating that
 the court will have to construe the term in context in order to determine whether it is a
condition or a warranty.
 The Court of Appeal in Man Financial (at [162]–[173]) identified some factors that may
assist the court in determining whether or not a contractual term is a condition. The four
factors are classification by statute, express classification by the parties, availability of a
prior precedent, or use of the term in mercantile transactions. Where none of the four
factors were applicable, the court had to ascertain the objective intention of the
contracting parties themselves by construing the actual contract itself (including the
 contractual term concerned) in light of the surrounding circumstances as a whole (see Man
Financial at [161] and [174]).
 (In this case, cl4 of the CNCA, though expressly providing for immediate termination
of the CMPA, it was not the objective intention of both contracting parties to treat it
as a sufficiently important term to be classified as a condition (fails Situation 3(a)).
Further, there was minimal consequences for the breach, therefore it fails to fulfil
the requirements of Situation 3(b) (because there was no right to terminate under
common law, right to terminate arose pursuant to express contractual provisions)

Can terminate, because concurrent right:

Lombard North Central v Butterworth [1987] QB 527
Facts  Dfs leased computer equipment from Pf under an agreement that provided for the payment
of rentals at quarterly intervals on a specified day.
 Clause 2(a) of the contract stipulated that punctuality in making payments "is of the
essence".
 Clause 5(a) additionally provided for a right to terminate in the event of default in punctual
payment by the lessee.
 When Df failed to pay promptly, Pf terminated the contract.
Holding  Inclusion of cl 5(a) had led to conclusion that cl 2(a) was a condition.
 Thus, because a condition had been breached, Df’s breach was a repudiatory breach and Pf
was entitled to terminate under common law
 Thus, the owner's right to terminate had arisen under both express contractual provisions
and the common law
 If Pf has the right to terminate under common law, then he can recover loss of bargain
damages (in this case, future rentals payable subject to a discount for accelerated receipt)
 Cf Financings – similar case on non-payment. However, there was no repudiatory breach in
Financings to give rise to a right to terminate under the common law which would have
allowed the court to reach the same conclusion as that in Lombard.

Cannot terminate, no common law right:

Financings Ltd v Baldock [1963] 2 QB 104
Facts  Contract for hire purchase of a lorry included a termination clause if the payment was late.
 Non-payment for two months after initial down-payment made.
 Owner purported to terminate contract under termination clause.
Holding Because contract was terminated under an express termination clause without a concurrent right
under common law, they could only recover the unpaid instalments for the two months.
 No repudiation under common law but only non-payment, for which Pfs themselves
terminated agreement under express termination clause
 In the absence of any express contractual provision to the contrary, the non-payment of the
two instalments would not of themselves go to the root of the contract or evince an intention
on the part of the hirer no longer to be bound by the contract (i.e. not under RDC Situation 2
or 3(b))
 Thus, owners only had a right to terminate under express contractual provisions; no right to
terminate had arisen under the common law
 As a result, only entitled to recover damages for unperformed obligations which had accrued
at the date of termination

An owner who only had the right to terminate a hire-purchase contract pursuant to an express
termination clause was entitled only to outstanding hire charges which had already accrued prior
to the termination date, and not to the loss of the entire bargain comprising future hire charges

Max Media FZ LLC v Nimbus Media Pte Ltd [2010] 2 SLR 677, [2010] SGHC 30 at [35]:
Andrew Ang J: “Currently, where a contract is terminated pursuant to an express provision alone, ie, under
Situation 1, damages for loss of bargain may be recoverable only if there is a concurrent repudiatory breach
under common law: see Lord Nicholls' speech in Lombard ([31] supra) at 546 which was reaffirmed by the
Court of Appeal in Sports Connection at [55] (see also Tan Wee Fong v Denieru Tatsu F&B Holdings (S) Pte Ltd
[2009] SGHC 290 at [31]-[35]). On the other hand, without a repudiatory breach under common law, the
innocent party may not claim for damages arising after the contract's termination (see generally Financings
([31] supra)), although it will still be entitled to recover damages in respect of the loss it suffered at or before
the date of termination. But if Situation 1 is substantially the same as Situation 3(a), then this bifurcated
principle would make no sense. It is artificial to ask what is the nature of a term under common law where
there is within the contract an express provision stating that the breach of that term would give the
innocent party the right to terminate. This quandary was also recognised in Brian R Opeskin's article,
"Damages for Breach of Contract Terminated under Express Terms" [1990] LQR 106 (Apr) 293”.

Invocation of express termination clause is effective for termination under common law too:
Stocznia Gdynia v Gearbulk Holdings [2009] EWCA Civ 75, [2009] 3 WLR 677 esp [44-45]
Facts  Contract for sale of ship; seller committing common law repudiatory breach by non-delivery.
 Contract contained express termination clause.
 Purchaser’s letter gave notice to terminate invoking express termination clause.
Holding Held, notice effective to terminate both for common law repudiation and under express
termination clause; purchaser entitled to damages for loss of bargain.

Moore-Bick LJ:
“It must be borne in mind that all that is required for acceptance of a repudiation at common law
is for the injured party to communicate clearly and unequivocally his intention to treat the contract
as discharged: see Vitol SA v Norelf Ltd [1996] AC 800, 810 g -811 b, per Lord Steyn.
If the contract and the general law provide the injured party with alternative rights which have
different consequences, as was held to be the case in the Dalkia case [2006] 1 Lloyd’s Rep 599, he
will necessarily have to elect between them and the precise terms in which he informs the other
party of his decision will be significant, but where the contract provides a right to terminate which
corresponds to a right under the general law (because the breach goes to the root of the contract
or the parties have agreed that it should be treated as doing so) no election is necessary.
In such cases it is sufficient for the injured party simply to make it clear that he is treating the
contract as discharged: see the Dalkia case [2006] 1 Lloyd’s Rep 599, para 143, per Clarke J. If he
gives a bad reason for doing so, his action is none the less effective if the circumstances support it.
That, as I understand it, is what Rix LJ was saying in Stocznia Gdanska SA v Latvian Shipping Co
[2002] 2 Lloyd’s Rep 436, para 32, with which I respectfully agree.
In the present case the parties accept, and indeed the arbitrator has found, that the breaches on
the part of the yard which entitled Gearbulk to terminate the contracts were in each case sufficient
to amount to a repudiation. I accept Mr Dunning's submission that in its letters of 7 November
2003 and 4 August 2004 Gearbulk purported to terminate the contract pursuant to article 10.1(b)
and (c) and not under the general law, but each of the letters made it clear that it was treating
the contract as discharged and in those circumstances each was sufficient to amount to an
acceptance of the yard's repudiation.
In its letter of 30 November 2004 Gearbulk sought to rely on both. Mr Dunning said that letter was
equivocal as between reliance on the terms of the contract and reliance on the general law.
Perhaps it was, but it was quite unequivocal as to Gearbulk's intention to treat the contract as
discharged and that was all that was necessary".

Summary
 English position: Whether aggrieved party who elects to terminate a contract for breach can claim damages
for the loss of the entire bargain depends on whether he only had express contractual right or concurrent
right in common law. E.g. Breach of condition, repudiatory breach of an intermediate term going to the root
of the contract by depriving the aggrieved party of substantially the entire benefit of the contract
 Adapted in Singapore (see above cases)
o Not entitled to loss of entire bargain if only had express termination clause to rely on (Financings)
o If had concurrent right in common law, then entitled (Lombard)
o Where an aggrieved party has a right to terminate pursuant to an express termination clause as well
as a concurrent common law right to terminate, his invocation of the express termination clause may
also be effective as a termination for common law repudiation; thus entitling him to damages for the
loss of the entire bargain (Stocznia Gdynia).
 VIII. AGGRIEVED PARTY’S ELECTION TO TERMINATE [SITUATION 3(A) and 3(B)]
 A breach of contract, even a repudiatory one, does not itself bring the contract to an end; rather it confers
on the aggrieved party a right of election
 Aggrieved party must choose whether
1) To accept the repudiation, terminate the contract, and sue for damages; or
2) To affirm the contract and continue with performance (keep the contract alive)

Repudiation does not automatically terminate a contract; acceptance needed:

Geys v Societe Generale, London Branch [2012] UKSC 63
Facts  Dispute over when Pf’s contract of employment to Df ended
 Issues
1) Whether a repudiation of a contract of employment by the employer which took the form
of an express and immediate dismissal automatically terminated the contract, or whether
the normal contractual rule that the repudiation had to be accepted by the other party
applied equally to that situation (main issue we are concerned with)
2) The date of termination of G's contract of employment.
Holding  CA held that it ended when the payment in lieu of notice (PILON) was made by Df to Pf’s
bank account
 Rejected Df’s argument that its repudiatory dismissal of Pf earlier had automatically
terminated the contract

Lord Sumption dissenting

 FIRSTLY – A party's repudiation of a contract of employment did not automatically
terminate the contract. The contract would only be terminated if and when the other party
elected to accept the repudiation
 The overall effect of the automatic theory was to reward the wrongful repudiator of a
contract of employment with a date of termination which he had chosen, no doubt as being
most beneficial to him and most detrimental to the innocent party
o The automatic theory also failed to explain cases where, following an unaccepted
wrongful repudiation, provisions which did not survive the termination of the contract
had been enforced against the repudiator, such as covenants against competition and
clauses relating to disciplinary procedures
 Difficulties of automatic theory: How far would they extend? E.g. whether dismissals or
resignations should be treated differently according to whether they were express or
implied, immediate or delayed, outright or something less than outright. Would they
extend to wrongful repudiations of contracts of services as well as of contracts of
employment?
 SECONDLY – s8.3 still required the employee receive notification from the employer, in
clear and unambiguous terms, that his PILON had been made in exercise of the contractual
right to terminate the employment with immediate effect
 Employee should not be required to check his bank account regularly in order to discover
whether he was still employed. I.e. fairness, common sense
Remarks Remedies:
 There was a general rule that the innocent party to a repudiated contract could not treat it
as subsisting if performance on his part required the co-operation of the repudiating party,
and the contract was incapable of specific performance, with the result that that co-
operation could not be compelled
 In the instant case, although G had suffered no loss as a result of S's mistake, the operation
of the elective theory rather than the automatic theory would result in a substantial
windfall to him in terms of the calculation of his compensation payment

Method of acceptance:
 If the aggrieved party chooses to accept the repudiation and terminate the contract, he must generally
notify the defaulting party of his choice; mere silence is generally insufficient to amount to acceptance of
repudiation
 Lord Steyn in Vitol SA v Norelf Ltd [1996] AC 810 at 810: “An Act of acceptance of a repudiation requires no
particular form: a communication does not have to be couched in the language of acceptance. It is sufficient
that the communication or conduct clearly and unequivocally conveys to the repudiating party that the
aggrieved party is treating the contract as at an end”.
 The law does not require an injured party to snatch at a repudiation and he does not automatically lose his
right to treat the contract as discharged merely by calling on the other to reconsider his position and
recognise his obligation (Yukong Line v Rendsberg Investments [1996] 2 Lloyd’s Rep 604 (Moore-Bick J))
 However, if the aggrieved party elects to affirm the contract, he loses his right to terminate; the right of
election, once exercised, is not revocable
 The general rule is that an election to affirm must be unequivocal. The aggrieved party will not be held to
have affirmed unless he had knowledge of the facts giving rise to the breach; and it has been suggested
that he must also know of his right to choose between affirmation and termination.
 Although there is authority that a party will not be held to have elected to affirm unless he knew not only
of the breach but also of his right to terminate (Peyman v Lanjani [1985] Ch 457), he might nonetheless be
estopped (regardless of his knowledge of his right) from denying affirmation if the other party acts on his
apparent affirmation (The Hannah Blumenthal [1983] 1 All ER 34).

Election is to be contrasted with equitable estoppel (Lord Goff in Motor Oil Hellas (Corinth) Refineries v Shipping
Corp of India (The “Kanchenjunga”) [1990] 1 Lloyd’s Rep 391 at 399):
Election Equitable estoppel
See Hughes v Metropolitan Railway Co
(1877) 2 App Cas 439 for the definition of
principle of equitable estoppel
Definition But in the context of a contract, the On the other hand, equitable estoppel
principle of election applies when a state of requires an unequivocal representation by
affairs comes into existence in which one one party that he will not insist upon his
party becomes entitled to exercise a right, legal rights against the other party, and such
and has to choose whether to exercise the reliance by the representee as will render it
right or not inequitable for the representor to go back
on his representation
Knowledge This election has generally to be an No question of any particular knowledge of
informed choice (made with facts giving the representor
rise to the right)

Finality? It is final once made (not dependent upon Suspensory only

reliance on it by the other party); not
revocable
Representation Both election and equitable estoppel require unequivocal representation.
Perhaps because each may involve a loss, permanent or temporary, of the relevant party's
rights.
BUT: The party making his election is The party to an equitable estoppel is
communicating his choice whether or not representing that he will not in future
to exercise a right which has become enforce his legal rights.
available to him
His representation is therefore in the nature
of a promise which, though unsupported by
consideration, can have legal consequences;
hence it is sometimes referred to as
promissory estoppel

 Exception to the rule that an election to affirm, once exercised, is irrevocable – cases of “continuing
repudiatory” conduct by the defaulting party: The aggrieved party who has elected to affirm the contract
after the first breach may be able to treat the continuing non-performance as a fresh act of repudiation
(Johnson v Agnew [1980] AC 367; Safehaven v Springbok (1998) 71 P&CR 59). Although there cannot be
acceptance of the breach once a repudiation has been spent, an aggrieved party may be able to terminate
 a contract (notwithstanding earlier affirmation) if continued refusal of the defaulting party amounts to
further repudiatory conduct.
 Given that election is generally irrevocable, aggrieved party may be put in a difficult situation – reluctant to
terminate or affirm hastily.
 Therefore, third option: The party has a reasonable period of time in which to decide whether to terminate
or affirm

Time lapse between repudiation and election:

 Rix LJ in Stocznia Gdanska v Latvian Shipping Company (No. 2) [2002] 2 Lloyd’s Rep 436, [2002] EWCA Civ
889 at [87]
o There is a middle ground between acceptance of repudiation and affirmation of the contract – the
period when the innocent party is deciding what to do
o If he does nothing for too long, there may come a time when the law will treat him as having affirmed
o If he maintains the contract while reserving his right to treat it as repudiated if his contract partner
persists in his repudiation, then he has not yet elected
o Also possible that the party in repudiation will resume performance of the contract and thus end any
continuing right in the innocent party to elect to accept the former repudiation as terminating the
contract
 Fenson Atkinson LJ in Allen v Robles [1969] 3 All ER 154
o The lapse of time would only operate against them if … there was some prejudice to the defendant
or if in some way rights of third parties intervened or if their delay was ... of such a length as to be
evidence that they had in truth decided to accept liability. None of these possibilities arise here

Effects of termination:
 Once repudiation is accepted, contract is terminated prospectively rather than retrospectively. Both parties
are discharged from their future primary obligations under the contract, but rights accrued prior to
termination remain intact (Photo Production v Securicor Transport [1980] AC 827)
 To this extent, different from rescission ab initio which purports to unwind a contract retrospectively
 In fact, it is possible for some clauses in a contract to survive its termination, e.g.:
o Arbitration clauses (Heyman v Darwins Ltd [1942] AC 256)
o Confidentiality clauses (Campbell v Frisbee [2002] EWCA Civ 1374)
 Once terminated, contract cannot be revived even by parties’ agreement. Such an agreement will instead
be a new contract. (i.e. election to terminate is irrevocable)
Orix Capital v Personal Representative(s) of the Estate of Lim Chor Pee, Deceased and Others [2009] SGHC 201
Facts Pf leased photocopiers to Df, Df breached once and accepted repudiation of contract by Pf.
Parties reinstated under another agreement later, payments not made, Pf sued Df for sums due.
Holding Claim allowed. Reinstatement of dead contract not possible, instead, new contract formed.

Judith Prakash J at [28]-[30]:

 Once a contract has been terminated, it comes to an end and is not capable of being
revived, even by the parties’ agreement
 Instead, where there is such an agreement, what the parties create is a new contract

Can one party terminate when both parties have been in breach?
Situation 2 (Repudiation) – only can terminate if following prerequisites are BOTH satisfied:
(a) Terminating party’s own breach was still continuing when it purported to treat the other party as having
repudiated
(b) The two breaches are dependent such that the terminating party’s prior breach prevented it from claiming
that the other party had now repudiated the contract

Alliance Concrete Singapore Pte Ltd v Comfort Resources Pte Ltd [2009] SGCA 34
Facts Df bought sand from Pf. Contract required minimum order and prompt payment. Df consistently
under-ordered and paid late. Pf wanted to terminate.
Holding No termination.
 Phang JA citing Jet Holding v Cooper Cameron (Singapore) Pte Ltd [2006] 3 SLR(R) 769 at [98]-
[99] which affirmed approach in English CA decision of State Trading Corporation of India Ltd v
M Golodetz Ltd:
 Makes no difference that both parties had committed breaches and that the breaches were
breaches of condition
 If A is entitled to treat B as having wrongfully repudiated the contract between them and
does so, then it does not avail B to point to A’s past breaches of contract, whatever their
nature
 A breach by A would only assist B if it was still continuing when A purported to treat B as
having repudiated the contract AND if B can show that A, being in breach of an obligation
in the nature of a condition precedent, was therefore not entitled to rely on B’s breach as
repudiation

In this case [48]:

 Although the breach by the seller was a continuing one in as much as the supply of sand
had not resumed when the buyer allegedly breached the contract (by repeatedly failing to
pay for monthly orders), the seller’s breach was unrelated to the buyer’s breach centring
on non-payment.
 Seller’s obligation to supply sand was not dependent on buyer’s prior obligation to pay for
sand; was more like the other way round.
 Thus, seller’s suspension of supply did not preclude it from relying on buyer’s breach for
termination of contract. Second prerequisite not satisfied.

IX. SITUATION 2 AND OTHERS: RENUNCIATION/REPUDIATION/ANTICIPATORY BREACH

Phang JA in STX Mumbai [2015] SGCA 35 at [78]:
 A fact situation that falls within Situation 2 e.g. renunciation would constitute an anticipatory breach
 An inability to perform on the part of the Df might also constitute an anticipatory breach if (except
Situation 1 where such a situation is provided for) it falls within the other situations
 Anticipatory breach of a condition within the ambit of Situation 3a, or one depriving the Pf of substantially
the whole benefit it was intended to obtained under the contract in Situation 3b, would entitled Pf to
elect to treat contract as discharged as well ([64]-[67])

Renunciation = repudiation then can terminate (Sit 2): Commented [EL2]: Renunciation: Party communicates
 Karthigesu JA in San International v Keppel Engineering [1998] 3 SLR(R) 447 at [20]: intention not to perform
o A renunciation of contract occurs when one party by words or conduct evinces an intention not to Repudiation: Non-performance of all contractual obligations
perform or expressly declares that he is or will be unable to perform his obligations in some i.e. goes to the root of the contract = fundamental breach
material respect. Sit 2: Anticipatory breach that is fundamental/repudiatory =
o Short of an express refusal or declaration the test is to ascertain whether the action or actions of the can terminate
Sit 3b: Breach of an innominate term that is
party in default are such as to lead a reasonable person to conclude that he no longer intends to be
fundamental/repudiatory = can terminate
bound by its provisions
o The party in default may intend in fact to fulfil the contract but may be determined to do so only in a
manner substantially inconsistent with his obligations, or may refuse to perform the contract unless
the other party complies with certain conditions not required by its terms
 Principle reaffirmed in Econ Piling v GTE Construction [2009] SGHC 213 at [30] by Judith Prakash J; contract
in that case was renounced as evidenced by conduct

i.e. Consists of 2 elements:

1) Inability to perform
 Intention not essential
 Own act or default essential
2) Inconsistency with stipulated terms

Anticipatory breach?
 Renunciation at or after time of performance = actual breach
 Renunciation before time fixed for performance = anticipatory breach (focus here is on this, since actual
breach is covered by Situations 3A and 3B)
 Aggrieved party has a choice to accept or affirm because in a wholly executory contract, parties do not
just have right to performance but ALSO right to maintenance of contractual relations (Anson)
o Cf Hochester: Nature of such contracts is that parties ‘impliedly promise that in the meantime neither
will do anything to the prejudice of the other inconsistent with the relation’
 Not every anticipatory breach entitles the innocent party to termination. In order to do so, an anticipatory
breach must be repudiatory - either a breach of condition or breach of an innominate term which
deprives the other party of substantially the whole benefit of the contract

1. ANTICIPATORY BREACH BY RENUNCIATION (SITUATION 2)

Party announces in advance that he will not be performing when the time arrives.

Renunciation occurs when one party, by words or conduct, evinces an intention not to perform part or the
entire contract:
Hochster v De la Tour (1853) 2 El & Bl 678
Facts  Employment contract repudiated by employer before specified date of engagement
 12 April: Df contracted for Pf to be his courier on a trip on 1 June.
 11 May: Df informed Pf he had changed his mind, did not require Pf’s services.
 22 May: Pf sued Df
 Issue:
i) Whether employee may sue for damages immediately, without waiting until specified
date for performance.
ii) Whether employee must himself remain ready and willing to perform until specified
date.
Holding Pf could sue for damages immediately. Did not have to wait until specified date for performance.

Lord Campbell CJ:

 More rational and mutually beneficial to allow Pf to be entitled to terminate.
 Pf, in this case, can go seek new employment (this then mitigates the damages claimable
from Df).

Considerations resulting in this decision, as discussed by Cockburn CJ in Frost:

 “… the announcement of the contracting party of his intention not to fulfil the contract
amounts to a breach, and that it is for the common benefit of both parties that the contract
shall be taken to be broken as to all its incidents, including non-performance at the
appointed time; as by an action being brought at once, and the damages consequent on
non-performance being assessed at the earliest moment, many of the injurious effects of
such non-performance may possibly be averted or mitigated.”
 i.e. Anticipatory breach benefits both parties; can avert/mitigate effects of non-
performance, assess damages ASAP (certainty)

Followed in:
Frost v Knight (1871-72) LR Ex 111
Facts  Df promised to marry Pf on death of his dad (who had objected to marriage)
 Df broke engagement while dad was still alive.
 Pf brought action for breach of promise to marry (NB: promise of marriage was legally
enforceable then)
Holding Cockburn CJ gave judgement for Pf; could sue even though dad was still alive
 AP has ‘inchoate right’ to performance of bargain. This becomes complete when it is time
for performance.
 In the meantime, AP retains ‘right to have the contract kept open as a subsisting and
effective contract’ because its ‘unimpaired and unimpeached efficacy may be essential to
his interests’, in allowing him to decide how best to deal with his accrued rights.

Aggrieved party’s options

  Affirm
o “The promise … may treat the notice of intention as inoperative, and await the time
when the contract is to be executed, and then hold the other party responsible for all
the consequences of non-performance
o But in that case he keeps the contract alive for the benefit of the other party as well
as his own; he remains subject to all his own obligations and liabilities under it, and
enables the other party not only to complete the contract, if so advised,
notwithstanding his previous repudiation of it, but also to take advantage of any
supervening circumstance which would justify him in declining to complete it.”
 OR Accept
o “… the promise may … , treat the repudiation 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
o In such action he will be entitled to such damages as would have arisen from the non-
performance of the contract at the appointed time, subject … to abatement in respect
of any circumstances which may have afforded him the means of mitigating his loss.

However, an anticipatory breach does not always give the aggrieved party the right to terminate the contract.
Such a right only arises if the anticipatory breach amounts to a repudiation.

When the anticipatory breach concerns a contractual term, e.g. a condition, but the consequences don’t pass
the test of discharging breach as in Hongkong Fir:
RDC Concrete Pte Ltd v Sato Kogyo (S) Pte Ltd and another appeal [2007] 4 SLR 413 (see Frustration, FM cl)
Facts RDC (appellant) was to supply concrete to SK (respondent) but frequent failure to supply
concrete (due to shortages of raw materials and plant breakdowns) forced Pf to purchase
cement at a higher price from another supplier to make up. Df pleaded force majeure
clauses.
Holding  Rejected the suggestion that where a party deliberately chooses to perform its part of
the contract only in a substantially inconsistent manner, innocent’s party termination in
justified. i.e. Cannot terminate if anticipatory breach that is not fundamental??
 Instead Court thought that in such a case, whether the innocent party can terminate the
contract would depend on whether 3(a) and 3(b) tests are satisfied. [95]
 But left open the possibility of the argument that a defaulting party who chooses to
perform the contract in a manner substantially inconsistent with its contractual
obligations is in substance and effect renouncing the contract concerned. [96] i.e. The
anticipatory breach is actually repudiation??

Breach not repudiatory:

San International v Keppel Engineering [1998] 3 SLR(R) 447
Facts  Relations between contractor Pf and subcontractor Df deteriorated
 When Pf issued notice for Df to recommence main office works, Df demanded
additional costs and time extension before commencement of works (anticipatory
breach because divisible obligations)
 Pf terminated contract on basis of repudiation of contract
 Issue: Whether Df’s (San International, appellant) refusal to undertake the main office
works unless they received additional payment and an extension of time (if so found)
was sufficiently serious enough to justify Pf (Keppel, respondent) terminating the
subcontract on 29 November 1995
Holding  SGCA held that Pf had power to order recommencement of works, but insufficient
evidence to determine if breach was repudiatory breach.
 Karthigesu JA at [25]:
o Not every intimation of an intention not to perform or of an inability to perform
some part of a contract will amount to a repudiation
o For an entire and indivisible contract, a refusal to perform any part of the agreement
will normally entitle the innocent party to treat the contract as discharged
o Otherwise a renunciation of some but not all the obligations under a contract will
NOT entitle the innocent party to rescind the contract
  Unless the renunciation amounts to a breach of a condition of the contract;
 OR deprives him of substantially the whole benefit which it was the intention
of the parties that he should obtain from the obligations of the parties under
the contract then remaining unperformed
 See Federal Commerce (below)
 I.e. If renunciation does not go to the root of the contract (anticipatory breach
is not fundamental/repudiatory) = only can terminate if 3a or 3b

Anticipatory breach of innominate term:

Federal Commerce and Navigation v Molena Alpha Inc (The “Nanfri”) [1979] AC 757
Facts  Owners (Molena Alpha) of vessel announced threatened breach
 Owner will issue “claused” bills of lading instead of bills with “freight pre-paid”
 On October 5, 1977, a series of telex exchanges took place. The charterers (Fed
Commerce) maintained that they had been put in "an impossible position
commercially" and demanded a withdrawal of the owners' instructions to the masters.
The owners insisted that the instructions to the masters would stand. Finally the
charterers accepted the totality of the owners' conduct as a repudiation of the charters
which was accepted.
 Umpire (in arbitration) held in favour of charterers, that owners’ conduct amounted to
a repudiation of the charterparties and they had validly terminated them on Oct 5 1077
Holding Held that because signing of pre-paid bills was essential to the charterers’ trade, the owners’
instructions constituted as anticipatory breach of contract which in the circumstances
amounted to a repudiation of the contract. Charterers entitled to determine the contracts.
 “… since the owners, notwithstanding that they had acted on legal advice, had evinced
an intention not to be bound by their contractual obligations, they had committed an
anticipatory breach of the charters which was repudiatory, and the charterers had
accepted that repudiation as they were entitled to do”
 Breached an “innominate term”, not a condition, BUT “… though that was not a breach
of a condition automatically giving the charterers the right to put an end to the contract,
it was, when examined on its individual demerits in the light of the immediate need to
issue the bills promptly, repudiatory of the contract as going to the root of it by
substantially depriving the charterers of virtually the whole benefit of it”

Lord Wilberforce (778-779):

 The clause is not drafted as a condition, and on its face it admits of being breached in a
number of ways some of which might be far from serious and would certainly not go to
the root of the contract
 But if conduct of one party goes beyond asserting his own view (possibly erroneous)
regarding the effect of the contract, and amounts to threatening a breach of contract
with serious consequences, his subjective desire to carry on with the contract cannot
prevent the other party from terminating the contract.
o Owners went far beyond this when they threatened a breach of contract with
serious consequences
 So although Courts may be reluctant to find repudiation when defaulting party has acted
in good faith, where defaulting party performs in a manner which is not consistent with
the terms of the contact, it is no defence for him to show that he acted in good faith.
o i.e. Affirmed that no need for actual intention as long as defaulting party fulfils his
contract in a manner “substantially inconsistent with his obligations”

Chua Chay Lee v Premier Properties Ltd [2000] 2 SLR(R) 464, [2000] SGCA 34
Facts  Df was property developer who acquired 24 apartments en bloc
 Pf owned one of the apartments and opted to exchange old apartment for new one
 Agreement provided (1) banker’s guarantee (2) 33 month time limit (3) liquidated
damages at 10% per annum on banker’s guarantee
 The issue before this court was whether the appellants were entitled to terminate the
contract on 11 May 1999.
  The sub-issues arising from this issue were (a) whether the projected completion date
of one year was realistic; (b) whether the appellants were entitled to terminate the
contract on the ground of a delay of one year; and (c) whether the developer's conduct
justified the appellants' termination.
Holding  Alleged anticipatory breach on respondents’ part
 But appeal dismissed because here, 12 months delay was not repudiation
 Note assessment of period of delay sufficient to constitute frustration is a question of
fact. Not whether there is “reasonable period of time” for performance

Tan Lee Meng J at [17]-[35]

 Rules for determining existence of repudiatory breach are the same as whether the
breach in question is anticipatory, or one occurring after the time for performance has
arrived
 Various ‘tests’ but overarching principle: “… to amount to repudiation a breach must go
to the root of the contract”
1) Time was not of the essence in this contract, therefore the delay is only a breach of
warranty. (term not a condition). But “The aggrieved party is relieved from his
obligations when the delay becomes so long as to go to the root of the contract and
amount to a repudiation of it.” i.e. delay which frustrates the contract
2) Delay constituting repudiatory conduct has been elucidated in other ways i.e. does
the occurrence of the event deprive the party which still has undertakings to perform
of substantially the whole benefit it was intended to obtained under the contract (as
consideration for his performance)?
o Lord Diplock in Photo Production at 849 and Afovos Shipping at 203: The
failure by one party to perform his primary obligation depends on whether
it has the effect of depriving the other party of substantially the whole
benefit he was intended to have under the contract
3) Another elucidation of the type of breach required, from The Nanfri at 783 by Lord
Fraser, citing Buckley LJ in Decro-Wall International SA v Practitioners in Marketing
Ltd[1971] 1 WLR 361, 380c: If the consequences of the breach were such that it
would be unfair to the injured party to hold him to the contract and leave him to his
remedy in damages as and when a breach may occur, then repudiation has taken
place.
 “a party to a contract may not purchase indefinite delay by paying damages”. A time will
come when the delay is so great that the defaulting party is guilty of repudiatory conduct.

Chua Chay Lee cf Universal Cargo Carriers Corporation v Citati [1957] 2 QB 402
Coram: Devlin J
 The shipowners had cancelled a voyage charter-party because no cargo had been provided. The court
asked what delay could lead to a claim for a repudiatory breach of a contract.
 Devlin J said: ‘This case gives rise to a difficult question. How long is a ship obliged to remain on
demurrage, and what are the rights of the owner if the charterer detains her too long?
 Translated into the terms of general contract law, the question is: Where time is not of the essence of the
contract – in other words, when delay is only a breach of warranty – how long must the delay last before
the aggrieved party is entitled to throw up the contract?
 The theoretical answer is not in doubt. The aggrieved party is relieved from his obligations when the delay
becomes so long as to go to the root of the contract and amount to a repudiation of it. The difficulty lies in
the application, for it is hard to say where fact ends and law begins.
 The best solution will be found, I think, by a judge who does not try to draw too many nice distinctions
between fact and law, but who, having some familiarity both with the legal principle and with commercial
matters and the extent to which delay affects maritime business, exercises them both in a common-sense
way.
 This is the sort of solution which, upon the supposition that it was acceptable to business men, the
commercial court was created to provide.’ and ‘But a party to a contract may not purchase indefinite
delay by paying damages .. When the delay becomes so prolonged that the breach assumes a character so
grave as to go to the root of the contract, the aggrieved party is entitled to rescind. What is the yardstick
 by which this length of delay is to be measured? Those considered in the arbitration can now be reduced
to two’ (as in the present appeal) ‘first, the conception of a reasonable time, and secondly, such delay as
would frustrate the charter-party . . In my opinion the second has been settled as the correct one by a
long line of authorities’.
Note that local decision finds that delay sufficient for breach is a question of fact, not law. But in this case, ship
is a transportation vehicle. Every minute lost is money lost for the ship company. But in Chua Chay Lee, time
was not of the essence.

Does anticipatory breach apply to executed contracts?

Yes:
The “STX Mumbai” [2015] SGCA 35
Facts  Appellant agreed to supply bunkers to respondent’s vessel (STX Mumbai) and required
payment to be made within 30 days
 The bunkers were duly supplied (executed contract; all that remained was payment),
but appellant demanded immediate payment of the contract price 3 days before the
due date
 Appellant felt this demand was justified by circumstances which “demonstrated that
payment would not be forthcoming when it fell due under the contract” i.e.
respondent’s group of companies’ poor financial health
 Claimed respondent anticipatorily repudiated contract by evincing a clear intention to
renounce it by refusing to comply with appellant’s demand OR that it was impossible
for them to have paid when due date arrived
 Focused on the latter in the appeal case
Holding Dismissed respondent’s appeal.

Application of the doctrine of anticipatory breach to executory contracts:

 Pf’s right to sue for anticipatory breach is not premised on actual breach by Df, since the
time for performance has not arrived yet
 This is even if the Df has clearly signalled that he will not be performing/will be breaching
the contract when the time for performance arrives

BUT
 Alternative justification: Pf’s right is premised on Df’s breach of a separate (albeit implied)
promise – that Df would not prevent Pf from performing its contractual obligations,
which simultaneously constitute the conditions precedent to Pf’s entitlement of Df’s
performance of obligations of the same contract
 In this case, if the Pf has performed all obligations under the contract then there is
nothing that Df would actually prevent by its repudiation of obligations (albeit in advance)
under the contract
 Then, there is no basis upon which the Pf is allowed to sue the Df for anticipatory breach
 Essentially there is no breach of the separate and implied promise, since Df would not
prevent Pf from performing its obligations in order to obtain the benefit of Df’s
performance

Refined approach
 While it is true there is no actual breach of the separate promise, even in such a situation,
Df is nevertheless in anticipatory breach if it states, in advance, that it will not perform
its contractual obligations when the time for the actual performance arrives
 i.e By conduct, evinced a clear intention not to perform contractual obligations
 Actual breach has occurred in substance (even if time for performance has not yet
arrived)
 Df is not prejudiced because conduct clearly evinces intention to breach obligations,
albeit notified in advance to Pf
  This would be an actual breach of another separate and implied promise by Df that it
would not act in such a manner so as to render the Pf’s performance of its obligations
towards the completion of the contract futile
 This is the same general purpose and rationale underlying the application of the doctrine
of anticipatory breach to executory contracts; would not matter whether contract was
executed or executory
 Is also just and fair, logical and coherent – a Pf who had performed all contractual
obligations (i.e. an executed contract) cannot possibly be in a worse position than if they
had yet to perform (although it is able and willing)
 But better to understand it using the ‘Df’s conduct’ approach rather than the ‘implied
promise’ approach

Purpose and principles of both implied promises:

1) Ensure just, fair result
o “If the defendant has evinced a clear intention that it will not perform its obligations
under the contract, then it is only just and fair that the plaintiff be permitted, in law,
to rescind the contract (if it so chooses) and/or claim damages on the basis of an
anticipatory breach of contract – regardless of whether the contract is executed or
executory”
2) Contract is not rendered an exercise in futility

Contracts the doctrine applies to

i) Executed (made and performed immediately)
ii) Executory (not yet performed)
iii) Unilateral

2. ANTICIPATORY BREACH, 3A AND 3B

The “STX Mumbai” [2015] SGCA 35
Holding 1) Df in anticipatory breach of a condition under 3a must show a serious
absence/readiness/willingness to perform [66]
2) Anticipatory breach under 3b does NOT require knowledge of actual nature and
consequences of the breach before ascertaining if Pf is deprived of substantially the
whole benefit which it was intended to obtain from the contract.
3) “In summary, it would appear that – assuming there is no express provision involving
Situation 1 in RDC Concrete – an anticipatory breach could (potentially, at least) fall
within the ambit of the remaining situations (viz, Situation 2, Situation 3(a) and
Situation 3(b)). Much would of course depend on the precise facts of the case
concerned” [77].

3. INCAPICITATING ONESELF FROM PERFORMING (NOT INCLUDED IN RDC)

General rule: Incapacitation as an anticipatory breach will constitute a repudiatory breach since it becomes
impossible for defaulting party to fulfil his obligation.

Performance inconsistent with contractual obligations? Relevance of bona fide beliefs (good faith)?
Vaswani v Italian Motors [1996] 1 WLR 270 (Lord Woolf)
Facts  Car sellers Df demanded that buyer Pf pay a sum of money more than what he was
obliged to pay under the contract (Ferrari car, price variation clause), genuinely believing
that this was the amount due (although it was not)
 When Pf did not pay, Df treated as repudiation and suspended Pf’s deposit
 Pf sued
Holding Df did not repudiate contract.
 There was no conduct by Dfs that was totally inconsistent with the continuance of the
contract.
o Although in this case Df did indicate to Pf that he should pay a sum which was
excessive or the deposit would be forfeit, Df did not go further to say that it would
be purposeless to pay the correct sum.
 o Buyer in difficult position when faced with threatened non-performance by seller
o If he refuses to pay when faced with an erroneous but good faith demand by the
seller, he may not be able to show that the seller has repudiated the contract
o To be safe, he must go further and tender performance of the sum which he believes
is the sum due and thereby hope to persuade the Court that, when the seller
refused to accept that performance, he thereby repudiated the contract
 Demonstrates Courts’ reluctance to conclude that a party who has acted in good faith
has repudiated the contract.
 Not easy to reconcile with the principle that bad faith is not required for establishing a
breach of contract (strict liability).

But good faith is not an invincible defence:

The Nanfri (Lord Wilberforce)
Holding  But if conduct of one party goes beyond asserting his own view (possibly erroneous)
regarding the effect of the contract, and amounts to threatening a breach of contract
with serious consequences, his subjective desire to carry on with the contract cannot
prevent the other party from terminating the contract.
 So although Courts may be reluctant to find repudiation when defaulting party has acted
in good faith, where defaulting party performs in a manner which is not consistent with
the terms of the contact, it is no defence for him to show that he acted in good faith.

Therefore,
 It is not a repudiation for a party to put forward in good faith his genuine interpretation of what the
contract requires of him (Woodar Investment v Wimpey Construction [1980] 1 WLR 277)
 But where that party performs in a manner inconsistent with the terms of the contract, it is no defence for
the him to show that he had acted in good faith (Federal Commerce & Navigation v Molena Alpha (The
“Nanfri”)).
 In other words, the reconciliation proceeds by distinguishing between actual breach and anticipatory
breach. Where the breach is anticipatory only and comprises the assertion that of an interpretation of the
contract which turns out to have been erroneous, the courts are slow to infer that there has been a
repudiatory breach.
 Were the law otherwise, it would be difficult to conduct negotiations, prior to the time of performance,
about the meaning of a contract without running the risk of repudiating the contract.
 But, when it comes to the time of performance, and a party performs inconsistently with the terms of the
contract, he should not be allowed to rely on his own good faith, but mistaken, interpretation to say that
his breach had not been repudiatory.

4. ELECTION BY AGGRIEVED PARTY

See above at intro, briefly.

Acceptance of repudiation can be immediate; do not have to wait for date performance is due:
Hochster v De la Tour (1853) 2 El & Bl 678, 118 ER 922
Holding

Vitol SA v Norelf Ltd (The “Santa Clara”) [1996] 3 WLR 105 esp 113-114
(Lord Steyn)
Facts 
Holding 1) “Where a party has repudiated a contract the aggrieved party has an election to accept
the repudiation or affirm the contract, he must generally communicate his decision to
the breaching party [citing the Fercometal case].
2) An act of acceptance of a repudiation requires no particular form: a communication does
not have to be couched in the language of acceptance. It is sufficient that the
communication or conduct clearly and unequivocally conveys to the repudiating party
that that aggrieved party is treating the contract as at an end.
3) … the aggrieved party need not personally, or by an agent, notify the repudiating party
of his election to treat the contract as at an end. It is sufficient that the fact of the election
 comes to the repudiating party's attention, e.g. notification by an unauthorised broker
or other intermediary may be sufficient
4) … A failure to perform may sometimes signify to a repudiating party an election by the
aggrieved party to treat the contract as at an end....
5) [Failure to perform does not always constitute acceptance, but] … our law does in
exceptional cases recognize acceptance of an offer by silence. [All depends on the
particular contractual relationship and circumstances, whether mere failure to perform
suffices]
6) ... Similarly, in the different field of repudiation, a failure to perform may sometimes be
given a colour by special circumstances and may only be explicable to a reasonable
person in the position of the repudiating party as an election to accept the repudiation.”

Unwanted performance by innocent party:

White and Carter (Councils) Ltd v McGregor [1962] AC 413 (Lord Reid)
Facts  Dfs entered into contract with Pfs under which Pfs agreed to display advertisements of
the Dfs’ garage for a period of three years on plates attached to litter bins
 Later the same day, Dfs wrote to Pfs stating that they no longer wished to continue with
performance of the contract
 Pfs refused to accept cancellation and proceeded to display the advertisements and then
brought an action to recover the contract price (Elected to affirm rather than terminate
in the face of repudiation)
 Appeal with 3-2 split in HL
Holding  Pfs refused to accept cancellation of contract by Dfs and proceeded with contract
accordingly. Court held that they were entitled to do so.
 General rule: No need for innocent party to mitigate his/her loss if he/she chooses to
keep the contract afoot.
 In this case
o Pfs were not under an obligation to accept the Dfs’ breach, even though it was
“unfortunate” that Pfs had “saddled themselves with an unwanted contract causing
an apparent waste of time and money”
o Had the option of waiting until date of performance or accept repudiation (via
anticipatory breach) at once
o On facts, repudiation was not accepted, and so Pfs were allowed to continue
performance
o Vital factor – Pfs’ claim was one in debt (for contract price) and not for damages and
so mitigation rules had no application
 Is there an unrestricted right to elect? Lord Reid’s exceptions:
1) Innocent party not permitted to continue with the contract if cooperation is required
from the party in breach (whose cooperation will obviously not be forthcoming)
2) If the person has no legitimate interest (financial or otherwise) in performing the
contract rather than claiming damages, he ought not to be allowed to saddle the
other party with an additional burden with no benefit to himself.
o i.e. If a party has no interest to enforce a stipulation, he cannot in general
enforce it: so it might be said that, if a party has no interest to insist on a
particular remedy, he ought not to be allowed to insist on it

Locally, regarding Lord Reid’s legitimate interest test in White v Carter:

MP-Bilt Pte Ltd v Oey Widarto [1999] 1 SLR(R) 908, [1999] SGHC 70 esp [30-39] (re the 2nd exception of Lord
Reid’s statement)
Facts  Df contracted to buy a flat from Pf.
 Upon completion of foundation works, Df had to pay the instalment but defaulted.
 Pf sued for instalment and interest due, stating that they had a right to affirm the
contract.
Holding  The innocent party has the right to elect whether he will treat the contract as annulled
or still alive.
  The rules governing mitigation of damages do not apply to the innocent party’s choice of
remedy for the other party’s breach.
 In making his choice the innocent party is not required to act reasonably. He is completely
free to act as he judges to be in his best interest.
 The contract-breaker has no right to force the innocent party to accept the repudiation
if the innocent party can complete the performance unilaterally, without the assent and
cooperation of the contract-breaker.
 The innocent party, then, is entitled to all the benefits, and bound by all the obligations
under the contract.

Limitations:
1) It cannot apply retrospectively to accrued debts (which can be sued for even after
acceptance of repudiation)
2) Does not apply where innocent party cannot reasonably perform his obligation without
the cooperation of the contract-breaker (if so, only remedy is damages and not the full
contract price)
3) Cannot apply when innocent party is legally obliged/under a practical compulsion to
complete performance of the contract in question, and other contracts entered into
based on the contract in question
o Because the doctrine was conceived in the context of the innocent party rejecting
the repudiation by the other party and exercising his right to complete performance
when the former has a legitimate interest to protec

5. OBLIGATION OF AGGRIEVED PARTY

In a situation of anticipatory breach, where the innocent party has elected to affirm the contract, he/she
cannot later claim absolution from his/her obligations under the contract itself i.e. If aggrieved party affirms
contract, he himself must tender performance:
Fercometal SARL v Mediterranean Shipping Co SA (The “Simona”) [1988] 3 WLR 200
Facts  In a charter-party, the charterers purported to terminate the contract in advance.
 The owners could elect to accept or refuse the repudiation.
 Ble o
 On the date of delivery however, the ship was not ready (i.e. owners in breach).
Holding  Aggrieved party either accepts of affirms, no third choice to affirm the contract and yet
to be absolved from tendering further performance unless and until defaulting party
gives reasonable notice that he is once again able and willing to perform.
 Such a choice would negate the contract being kept alive for the benefit of both parties
and would deny the party who unsuccessfully sought to rescind, the right to take
advantage of any supervening circumstance which would justify him in declining to
complete.
 If the aggrieved party decides to keep the contract in force, he must himself tender
performance as usual and perform his contractual obligations
 If the aggrieved party fails to perform, he will himself be in breach when the time comes,
giving the other party the right to terminate
 Since the ship was not ready at the designated port on time, the charterers were allowed
to sue for breach of condition and discharge themselves from the contract
 The only exception is if the repudiating party made it clear that it has no interest in
receiving performance and the aggrieved party accordingly does not tender it. The
repudiating party will then be estopped from complaining. (Not found in this case)