UK: Repudiatory Breach Of Contract Revisited

Last Updated: 24 October 2011
Article by Wai Yue Loh and Reema Shour

DRL Limited v. Wincanton Group Limited [2011] EWCA Civ 839

The issue of repudiatory breach of contract is a notoriously difficult one because it is often not easy to establish which contractual party is in repudiatory breach and which has accepted the other's repudiation and thereafter ceased to perform its own contractual obligations. This case demonstrates that there can be a very fine line between imposing improper commercial pressure on a counterparty and repudiating one's own contractual obligations.

The background facts

Wincanton supplied logistics services to DRL under an agreement concluded in 2005 and which was subsequently varied in 2007. Under the agreement, Wincanton would invoice DRL weekly for amounts owed less certain deductions, including any damage and stock loss liability, and the invoices were to be agreed and signed off by both parties. Under the agreement, DRL was obliged to pay the invoices without deduction, set-off or counterclaim although it could withhold payment of any sum subject to a bona fide dispute provided all sums that were not disputed were paid.

A dispute arose between the parties as to amounts due and payable to Wincanton and cross-claims were asserted by DRL. In order to avoid untimely termination of the original agreement and to allow DRL time to find a replacement service provider, the parties entered into an agreement in 2008, whereby the 2007 agreement was varied to the extent that the parties' respective positions would be temporarily suspended. Under the 2008 agreement, DRL would pay Wincanton £1 million immediately and Wincanton would continue supplying logistics services against prompt payment of invoices for deliveries made as of 19 January 2008.

On 26 February 2008, Wincanton stated that it would suspend future deliveries unless DRL paid certain significant sums relating to the disputed pre-2008 invoices. On 28 February, Wincanton repeated this threat and said that it would stop deliveries unless it was paid the sums it was demanding on that same day. As a result, DRL refused to pay an invoice dated 26 February 2008 and Wincanton thereafter made no further deliveries. Each party alleged that the other was in repudiatory breach.

At first instance, the Judge held that although Wincanton's conduct had been improper and unjustified, it had not been repudiatory and DRL had not been entitled to treat the 2008 contract as discharged. Rather, DRL's refusal to pay Wincanton under the 26 February 2008 invoice was itself repudiatory and Wincanton had accepted the repudiation.

Court of Appeal decision

Repudiation

Lord Justice Lloyd, giving the leading judgment in the Court of Appeal, disagreed with the first instance Judge on the repudiation issue. He stated that Wincanton's demand for additional payments in respect of the old invoices was plainly a flagrant breach of the 2008 agreement, particularly as Wincanton had already received £1 million as part of the price for continuing to deliver. The Appeal Judge cited further examples of Wincanton's repudiatory behaviour, namely asserting a lien over goods held by them and diverting goods destined for delivery to DRL's new logistics services supplier on 26 February 2008, goods that were to be used to fulfil deliveries to customers due on or after 3 March. His view was that Wincanton was already in breach of contract in highly material respects before DRL refused to pay the 26 February invoice, even though it continued to deliver goods to customers day by day for the time being. Furthermore, Wincanton's stance on 28 February to make no further deliveries at all the next day if it was not paid amounted to a repudiation of all its obligations under the 2008 contract and that repudiatory breach was accepted by DRL when it stated that it would not be making any further payments to Wincanton under the agreement.

From that point on, the Appeal Judge held, the agreement as a whole and as varied was discharged and the temporary suspension of claims under the 2007 agreement came to an end. DRL was consequently discharged from its obligations to pay the latest 2008 invoices free from set-off or deduction and could assert cross-claims as a reason for not paying them, something which it had not been able to do while the 2008 agreement subsisted. It followed that DRL's refusal to pay the 26 February invoice was not a breach of contract.

Applicable time limits

DRL had a number of claims against Wincanton under the 2007 agreement, including for damaged and lost products. The 2007 agreement incorporated the 1998 terms and conditions of the Road Haulage Association (RHA). An issue arose as to applicable time limits under these terms and conditions.

Condition 13(1) of the RHA terms and conditions provided that the carrier would not be liable for loss of or damage to the goods unless it was advised of the loss or damage within a certain number of days and a written claim made thereafter within a specific period of time. There was however a proviso allowing later notification if it was not reasonably possible to notify within the times laid down. Condition 13(2) provided for a limitation period of one year after delivery.

The Court of Appeal held, in agreement with the first instance Judge, that the bespoke provisions of the 2007 agreement were incompatible with and overrode the application of condition 13(1). The point of 13(1) was to put the carrier on early notice of potential claims relating to loss of or damage to consignments that it was facing from the consignor. In this case, however, Wincanton was the party responsible for "self-certifying" claims against itself in the sense that it informed DRL on a weekly basis of any damage or stock loss liability and deducted those amounts from the invoices. There was therefore no need to notify or make a written claim within the time periods set out in condition 13(1) to Wincanton because it was already aware of any such claims.

However, Lord Justice Lloyd held that the one year time limit under condition 13(2) remained applicable because it imposed a time limit for bringing suit i.e. commencing legal proceedings. This was distinct from a time limit for notification of a claim to the carrier and did not conflict with the express provisions of the bespoke agreement.

Comment

The Court of Appeal decision in this case highlights two common bases for contractual disputes: repudiatory breach of contract and applicable time limits. Parties incorporating standard terms and conditions into their individually drafted contracts, particularly those containing provisions dealing with applicable time limits, should aim to ensure that there is no conflict or incompatibility between the two regimes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions