What? The property case of Howard-Jones v Tate [2011] is a useful reminder of the difference between rescission of a contract and discharge of a contract by breach.
So What? If a contract is rescinded it is set aside and treated as never having come into existence, but in the case of a repudiatory breach, the contract has come into existence but may, if the innocent party so chooses, come to an end as a result of the breach and damages can be claimed.
Rescission is a discretionary remedy of the court and may be available, for example, where a contract is entered into as a result of misrepresentation, mistake or duress. If a contract is rescinded it is set aside and treated as never having come into existence.
By contrast, if a party is in repudiatory breach of contract then the other party has the right to choose whether to treat the contract as discharged or to affirm it and, in either case, to claim damages for the breach. Therefore the contract has come into existence but, if the innocent party so chooses, it comes to an end as a result of the breach.
Case Summary
In this case, Mr Howard-Jones purchased a property from Mr Tate. The sale contract contained an obligation on Mr Tate to install electricity and water supplies to the property within six months from completion. Mr Tate failed to comply with this obligation and Mr Howard-Jones purported to rescind the contract, recover the purchase price and costs and damages.
The Court of Appeal found that Mr Tate was in repudiatory breach of contract. From the point when Mr Howard-Jones elected to treat the contract as at an end as a result of the breach all the unperformed obligations of the parties were discharged and a secondary obligation arose for Mr Tate to pay monetary compensation to Mr Howard-Jones for the losses resulting from the breach. Mr Howard-Jones was not entitled to recover all the monies he had paid under the contract unless the consideration for the payment had wholly failed, which was not the case. Rather, he should be awarded damages for the losses suffered as a result of the breach, being the cost of having the electricity and water supplies installed and any other losses he suffered as a result of the services not being installed in time.
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