Contract repudiation takes place where the other contracting party shows an unwillingness or inability to render performance of the contract or an intention to fulfil the contract in a manner that is substantially inconsistent with its obligations. If you believe your contract may have been repudiated, it is important to have a contract lawyer identify and respond as soon as possible to ensure your position is protected and to avoid repudiating or abandoning the contract yourself.
Has repudiation occurred?
Whether repudiation has occurred is determined objectively, often by the conduct and words of the other party, or the other party’s actual inability to perform. In the eyes of a reasonable person, the test is whether the party’s conduct would convey in the position of the other contracting party, renunciation of the contract as a whole or of a fundamental obligation under it. Courts will look to the conduct of the repudiating party rather than the subjective state of mind of the repudiating party.
A contract is terminated only if and when the innocent party accepts that repudiation. There is no need to prove a subjective intention to repudiate.
Responding to Repudiation
As a responding party to a repudiation, you may choose to:
- accept the repudiation (ie. elect to terminate the contract); or
- elect to continue performance of the contract.
A contract lawyer can assist you with understanding your obligations to perform under the contract. If you accept repudiation, you may have a cause of action for damages where repudiation occurs before the time for performance, enabling recovery of damages.
If you become aware of a significant breach, you should act quickly and check your contract immediately. The greater the wait, the greater you expose yourself to disk. There may also be consequences for third parties, either with whom you have contracted or with whom the other side has contracted. Repudiatory conduct may be cured by the breaching party, but only prior to the acceptance of the repudiation.
Anticipatory breach takes place when a contract is already repudiated before it has been performed. For example, where a party informs the other party that it will not oblige to a key clause or obligation under the contract. A party can retract its anticipatory breach provided that the non-breaching party has not relied on it.
LegalVision can assist you with any questions you may have about contract repudiation. LegalVision has a team of great lawyers who can assist you in understanding your contract and the obligations for both parties. Please call our office on 1300 544 755 and our Client Care team will happily provide you with an obligation-free consultation and a fixed-fee quote.