Court of Appeal finds that a party did not have to give notice
before terminating the contract for repudiatory breach
In this decision, again highlighting the benefit of precise
drafting, the Court of Appeal decided that the respondent, Richmond
Mercantile Ltd (a manufacturing company), was able to terminate an
agreement for repudiatory breach without complying with the notice
and remedy requirements in the contract's termination
The appellant, Vinergy International (PVT) Ltd (a chemical
distribution company), had entered an agreement with Richmond for
the supply of bitumen for an extendable term of 10 years.
Clauses 17 and 18 concerned termination and provided that either
party could terminate the agreement immediately upon failure to
observe its terms and remedy them "where..capable of being
remedied within the period specified in the notice given by the
aggrieved party to the party in default" (clause 17.1.1)
Richmond terminated the agreement for breach without serving
notice under that provision. An arbitral tribunal found that
Richmond had lawfully terminated the agreement and found that
Vinergy had committed three repudiatory breaches: breach of the
agreement's exclusivity provisions, failure to pay an invoice
for over a year and failure to pay demurrage for certain
The Court of Appeal explained that the key question was whether
one could imply into clause 17.1.1 an agreement that before a party
terminates the agreement, whether pursuant to clause 17.1.1 or
pursuant to the common law, that party must follow the procedure
set down in clause 17.1.1 of giving notice to remedy.
It decided that it was not possible to imply this into clause
17.1.1. Firstly, there was no mention in the clause of the
common law right to terminate for repudiatory breach.
Secondly, the express right to terminate in clause 17.1.1 depended
on the failure "to observe any of the terms" and such a
failure might be minor or major. Thirdly, clause 17 as a
whole provides six contractual rights to terminate, of which clause
17.1.1 was only one. The notice requirement in clause 17.1.1
didn't apply to the other five e.g. to the right to terminate
where one party suffers an insolvency event (17.2.2).
The Court concluded that the procedure in clause 17.1.1 was
intended only to apply to the specific right to terminate found in
clause 17.1 and not to any of the other express rights to terminate
found in clause 17 or to the right at common law to accept a
repudiatory breach as terminating the agreement. The Court
further observed that even if clause 17.1.1 did apply to
repudiatory breaches, "it cannot apply to [Vinergy's]
breach of the exclusivity provisions because that breach, as held
by the tribunal, was not capable of remedy."
The English Commercial Court has published two recent judgments of Mr Justice Popplewell in a single anonymised case concerning the removal of two arbitrators under section 24(1)(d)(i) of the Arbitration Act 1996.
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