BetterLawNotes-5 (2)

CONTRACT LAW

We’ve seen that an actual breach occurs when, the time for performance of the relevant primary obligation having accrued, the party bound fails to perform it as required.

By contrast, an anticipatory breach of contract occurs where:

(1) Before the time for performance by one party of a primary obligation has arrived, that party

(i) declares that it will not perform the obligation when the time for performance arises (sometimes called ‘renunication’) or

(ii) brings about a situation such that performance of the obligation will not be possible when the time for performance arises (sometimes called ‘impossibility’)

AND

(2) The effect of non-performance by the first party of that primary obligation will be to deprive the other party substantially the whole benefit which the parties had intended that the other party would derive from the primary obligations remaining to be fulfilled.

The principal consequence of an anticipatory breach is to give the innocent party the right to terminate the contract immediately and claim damages.

In other words, when faced with an anticipatory breach, the victim generally has a choice: either to (i) ignore the anticipatory breach and continue with performance of the contract or (ii) bring performance of the contract to an immediate end without waiting for the time for actual performance to arrive and claim damages.

Hochster v De la Tour (1853) 2 E &B 678

D agreed with H on 12th April for H to act his courier beginning on 1st June. On 11th May D purported to cancel the arrangement. On 21st May H claimed damages for breach of contract. D argued that there could be no breach of contract before 1st June and that H was obliged to remain ready and willing to perform up until that time. Held: H had been entitled to consider himself absolved from performance of the contract and to claim damages for breach.

‘. . . where there is a contract to do an act on a future day, there is a relation constituted between the parties in the meantime by the contract, and that they impliedly promise that in the meantime neither will do anything to the prejudice of the other inconsistent with that relation . . . from the day of the hiring till the day when the employment was to begin, they were engaged to each other; and it seems to be a breach of an implied contract if either of them renounces the engagement. . .

It seems strange that the defendant, after renouncing the contract, and absolutely declaring that he will never act under it, should be permitted to object that faith is given to his assertion, and that an opportunity is not left to him of changing his mind.’

(Lord Campbell CJ)

Frost v Knight (1872) LR 7 Ex 111

K promised to marry F on the death of K’s father. While K’s father was still alive, K broke off the engagement. Held: F could claim damages for breach of contract.

‘The considerations on which the decision in Hochster v De la Tour is founded are that the announcement of the contracting party of his intention not to fulfil the contract amounts to a breach, and that it is for the common benefit of both parties that the contract shall be taken to be broken as to all its incidents, including non-performance at the appointed time; as by an action being brought at once, and the damages consequent on non-performance being assessed at the earliest moment, many of the injurious effects of such non-performance may possibly be averted or mitigated.
It is true, as is pointed out by the Lord Chief Baron, in his judgment in this case, that there can be no actual breach of a contract by reason of non-performance so long as the time for performance has not yet arrived. But, on the other hand, there is–and the decision in Hochster v De la Tour proceeds on that assumption–a breach of the contract when the promisor repudiates it and declares he will no longer be bound by it. The promisee has an inchoate right to the performance of the bargain, which becomes complete when the time for performance has arrived. In the mean time he has a right to have the contract kept open as a subsisting and effective contract. Its unimpaired and unimpeached efficacy may be essential to his interests. His rights acquired under it may be dealt with by him in various ways for his benefit and advantage. Of all such advantage the repudiation of the contract by the other party, and the announcement that it never will be fulfilled, must of course deprive him. It is therefore quite right to hold that such an announcement amounts to a violation of the contract in omnibus, and that upon it the promisee, if so minded, may at once treat it as a breach of the entire contract, and bring his action accordingly.’

Cockburn CJ (with whom Keating and Lush JJ concurred).

 

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