Revise Breach for Cambridge 9084 (3.3.2)

A breach of contract occurs when a party, without lawful excuse, fails or refuses to perform what is due from them under the contract, performs defectively, or incapacitates themselves from performing. It is a violation of a contractual obligation by failing to act as the contract requires. Not all breaches are equal; the law distinguishes between breaches of different types of terms, which in turn dictates the remedies available to the innocent party. A 'lawful excuse' might include the contract being frustrated, which would discharge the contract and prevent a breach from occurring. The fundamental principle is that a binding promise has been broken, and the law must provide a recourse for the non-breaching party.

An actual breach occurs when a party fails to perform their obligations on the date fixed for performance or during the course of performance. The remedies available to the innocent party depend entirely on the classification of the term that has been breached. If a condition is breached, the innocent party is entitled to repudiate (end) the contract and claim damages, as seen in Poussard v Spiers and Pond. However, if the breach is of a warranty (a less vital term), the innocent party may only claim damages and the contract itself remains in force, as established in Bettini v Gye. For an innominate term, the remedy depends on the severity of the consequences of the breach.

A crucial distinction in contract law is whether a breach is 'repudiatory'. A repudiatory breach is one so significant that it gives the innocent party the right to choose to terminate the contract (i.e., to 'accept the repudiation').

A breach is repudiatory if it involves:

1. Breach of a condition: A term that goes to the root of the contract.
2. A serious breach of an innominate term: Where the breach deprives the innocent party of substantially the whole benefit they were intended to get from the contract (Hong Kong Fir Shipping v Kawasaki Kisen Kaisha).
3. Renunciation: Where one party clearly shows they no longer intend to be bound by the contract (as in anticipatory breach).

In contrast, a non-repudiatory breach (e.g., a breach of warranty) does not give the right to terminate. The innocent party's only remedy is to claim damages for any loss caused by the breach. The contract remains in force, and both parties must continue to perform their obligations.

An anticipatory breach happens when, before the time for performance has arrived, one party makes it clear that they will not be performing their side of the contract. This intention to breach can be communicated expressly (e.g., a direct statement) or impliedly (e.g., by conduct that makes performance impossible, such as selling the subject matter of the contract to someone else). The leading authority is Hochester v De La Tour, where a courier was told his services would not be needed before his start date. The court held that he did not have to wait until the performance date to bring an action; he could sue for damages immediately upon the repudiation.

When faced with an anticipatory breach, the innocent party has a critical choice. They can either (1) accept the repudiation, treat the contract as immediately terminated, and sue for damages, or (2) affirm the contract, meaning they treat it as still valid and wait for the original date of performance.

Affirming the contract is risky; if an intervening event frustrates the contract (as in Avery v Bowden, where war broke out), the right to damages may be lost. The case of White & Carter (Councils) Ltd v McGregor established that an innocent party can affirm and perform their obligations to claim the full contract price. However, this right is not absolute. It is limited where the innocent party: (a) needs the co-operation of the breaching party to perform, or (b) has 'no legitimate interest, financial or otherwise' in performing the contract rather than claiming damages. This second limitation was considered in The Alaskan Trader, where the court suggested that if a party affirms a contract unreasonably, they may be denied the contract price and be limited to a claim for damages.

One of the greatest risks in this area is wrongful termination. This occurs when a party terminates the contract in response to a breach, but they do not have the legal right to do so. This usually happens when a party incorrectly assesses a breach of warranty or a minor breach of an innominate term as being a repudiatory breach.

By purporting to terminate the contract without proper grounds, that party is themselves committing a repudiatory breach. This has the ironic effect of giving the original contract-breaker the right to accept this new repudiation, terminate the contract, and sue for damages for their own lost expectation under the contract. This highlights the importance of correctly identifying the type of term breached before taking the drastic step of termination.