Court of Appeal comments on test for repudiatory breach

On the facts, it was impossible clearly to find an intention by the vendor to abandon and altogether refuse to perform the contracts. On the contrary, the obvious inference from the facts is that the purchaser (and his solicitors) were only too well aware that the vendor wanted to enforce the contracts in accordance with their terms (either by completing them, or rescinding them and exercising remedies conferred by them), because the fall in the property market was highly advantageous to the vendor (and onerous to the purchaser).

The High Court erred in not taking into account all the circumstances, and only looking at the notices of rescission. To do so results in a lack of reality. The notices of rescission are internally inconsistent. But even if looked at in isolation, they do not clearly show an intention to abandon and altogether refuse to perform the contract. They show an intention to implement the contractual procedure to bring the contracts to an end and exercise contractual remedies, but their service was inconsistent with those contracts (as it was premature). Applying the test for repudiatory breach, from the perspective of a reasonable person in the purchaser's position, it was unclear whether the vendor's intention was to insist on the effectiveness of the notices of rescission, notwithstanding the terms of the contracts, or, if the error was pointed out, to abide by those terms.

There is a danger in attempts to clarify the application of a legal principle by a series of propositions derived from cases which had been decided on their own particular facts. As a result, argument tends to revolve around the application of those propositions which, if stated by the court in an attempt to assist in future cases, often becomes regarded as prescriptive, instead of concentrating on the application of the principle to the facts of the case in hand.

The legal test for repudiatory breach is simply stated. It is whether, looking at all the circumstances objectively from the perspective of a reasonable person in the position of an innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contract (Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11, Chilean Nitrate Sales Corporation v Marine Transportation Co Ltd [1982] 1 Lloyd's Rep 570).

Whether or not there has been a repudiatory breach is highly fact sensitive. As such, comparison with other cases is of limited value.

All the circumstances must be taken into account insofar as they bear on the objective assessment of the intention of the contract breaker. Motive is not, of itself, decisive. Motive may be relevant if it is something or it reflects something of which the innocent party was, or a reasonable person in his position would have been, aware and throws light on the way the alleged repudiatory act would be viewed by such a reasonable person. Motive is irrelevant if relied upon solely to show the subjective intention of the contract breaker.

Although the test is simply stated, its application to the facts may not always be easy to apply (for example, see the division of views in Woodar).