Cases on Breach of Contract
Contractual obligations impose a general duty to take reasonable care not to breach
them
Repudiatory breach= breach of condition, giving innocent party right to terminate the
contract
Breach of warranty= party MUST continue to perform their contractual obligation
Section 2: Consequences of breach
Photo Production Ltd v Securior Transport, 1980
Plaintiffs were factory owners that entered into contract with def. who would patrol the
factory premises (security company)
One of def. employees started fire to keep warm which accidentally spread and burned
the factory down
CA: applied fundamental breach rule; ruled contract was terminated
But HOL allowed appeal on basis:
1) whether exclusion clause didn’t apply was question of construction of the contract
and not about fundamental breach
Lord Diplock on effect of breach for contractual obligations:
Breaches in primary obligations (perform contract) may give other party release from
further performance
General secondary obligation- pay damages for non-performance of the primary
obligations of the contract
Applies where: other party is substantially deprived of the benefit of the contract; if so
then injured party may use right to terminate contract (innominate term approach)
Two options:
A) Discharge/terminate contract or (also applies for the anticipatory secondary
obligation)
B) pay monetary damages for any loss caused
A) Termination by repudiatory breach
Can injured party simply except this breach by non- performance of his obligations? Yes:
Vitol SA v Norelf Ltd, the Santa Clara, 1996
Ship was carrying cargo sailed& loaded it too late, after contractual period
Hence plaintiff buyer of cargo sent telegram he did not want cargo anymore due to
breach of condition (which was time period)
Both parties then didn’t perform their contractual obligations anymore
Buyer appealed that seller did not fulfil his contractual obligation
CA: mere failure to perform does not constitute acceptance (discharge) of the contract;
buyer made anticipatory breach by saying he did not want cargo anymore
Seller then appeal to HoL on basis that one could terminate the contract by non-
performance
Lord Steyn agreed with seller’s appeal: no particular form or communication of
acceptance of breach (which is termination) has to take place
It is sufficient to convey this termination to other party by conduct and not even
personally (hence, appeal allowed)
Contractual obligations impose a general duty to take reasonable care not to breach
them
Repudiatory breach= breach of condition, giving innocent party right to terminate the
contract
Breach of warranty= party MUST continue to perform their contractual obligation
Section 2: Consequences of breach
Photo Production Ltd v Securior Transport, 1980
Plaintiffs were factory owners that entered into contract with def. who would patrol the
factory premises (security company)
One of def. employees started fire to keep warm which accidentally spread and burned
the factory down
CA: applied fundamental breach rule; ruled contract was terminated
But HOL allowed appeal on basis:
1) whether exclusion clause didn’t apply was question of construction of the contract
and not about fundamental breach
Lord Diplock on effect of breach for contractual obligations:
Breaches in primary obligations (perform contract) may give other party release from
further performance
General secondary obligation- pay damages for non-performance of the primary
obligations of the contract
Applies where: other party is substantially deprived of the benefit of the contract; if so
then injured party may use right to terminate contract (innominate term approach)
Two options:
A) Discharge/terminate contract or (also applies for the anticipatory secondary
obligation)
B) pay monetary damages for any loss caused
A) Termination by repudiatory breach
Can injured party simply except this breach by non- performance of his obligations? Yes:
Vitol SA v Norelf Ltd, the Santa Clara, 1996
Ship was carrying cargo sailed& loaded it too late, after contractual period
Hence plaintiff buyer of cargo sent telegram he did not want cargo anymore due to
breach of condition (which was time period)
Both parties then didn’t perform their contractual obligations anymore
Buyer appealed that seller did not fulfil his contractual obligation
CA: mere failure to perform does not constitute acceptance (discharge) of the contract;
buyer made anticipatory breach by saying he did not want cargo anymore
Seller then appeal to HoL on basis that one could terminate the contract by non-
performance
Lord Steyn agreed with seller’s appeal: no particular form or communication of
acceptance of breach (which is termination) has to take place
It is sufficient to convey this termination to other party by conduct and not even
personally (hence, appeal allowed)
