LAW REPORT / Contract repudiation accepted by inaction

v 28 June 1996

Vitol SA v Norelf Ltd; House of Lords (Lord Mackay of Clashfern, Lord Chancellor, Lord Griffiths, Lord Nolan, Lord Steyn, Lord Hoffmann) 20 June 1996

An aggrieved party could as a matter of law accept a repudiation of a contract merely by himself failing to perform the contract. Whether in any particular case he had done so must depend on the circumstances.

The House of Lords allowed an appeal by the sellers, Norelf Ltd, reversed the decision of the Court of Appeal ([1996] QB 108) and restored the decision of Mr Justice Phillips ([1994] 1 WLR 1390) affirming an arbitration ruling against the buyers, Vitol SA.

The dispute arose out of a contract of 11 February 1991, by which Norelf sold to Vitol a cargo of propane c.i.f. north-west Europe to be shipped from the United States. Delivery of the cargo to the ship was to take place from 1 to 7 March. The sellers were to tender the bill of lading to the buyers promptly after loading. On 8 March the buyers telexed the sellers as follows:

It was a condition of the contract that

delivery would be effected 1-7

March 1991 . . . We are advised that the vessel is not likely to complete loading now until some time on 9 March, well outside the agreed contractual period. In view of the breach of this condition we must reject the cargo and repudiate the contract.

The buyers never retracted nor attempted to retract their repudiation of the contract. The sellers did nothing to affirm or perform the contract. Instead they resold the cargo at a loss. They then claimed against the buyers US$950,000 in damages, being the difference between the original contract price and the resale price. The premise of the claim was that they had accepted the buyers' repudiation.

The arbitrator held that the tenor of the rejection telex was such that the failure of the sellers to take any further step to perform the contract which was apparent to the buyers constituted sufficient communication of acceptance of the buyers' repudiation.

Jeremy Cooke QC and Andrew Wales (Clyde & Co) for the buyers; Andrew Popplewell and Miss N. Davis (Holman Fenwick & Willan) for the sellers.

Lord Steyn said it was established law that where a party had repudiated a contract the aggrieved party had an election to accept the repudiation or to reaffirm the contract. Acceptance of a repudiation required no particular form; it was sufficient that the communication or conduct clearly and unequivocally conveyed to the repudiating party that the aggrieved party was treating the contract as at an end. The aggrieved party need not notify the repudiating party of his election to treat the contract as at an end; it was sufficient that the fact of the election came to the repudiating party's attention.

The issue here was whether non-performance of an obligation was ever as a matter of law capable of constituting an act of acceptance. One could not generalise on the point. It all depended on the particular contractual relationship and the particular circumstances of the case. Like Phillips J, his Lordship was satisfied that a failure to perform might sometimes signify to a repudiating party an election by the aggrieved party to treat the contract as at an end.

The Court of Appeal had been strongly influenced by an obiter dictum of Kerr LJ in State Trading Corp of India Ltd v Golodetz Ltd [1989] 2 Lloyd's Rep 277 at 286, that

saying and doing nothing at all, other than a continuing failure to perform, cannot constitute an acceptance of a repudiation even if the grounds for such an acceptance then exist.

In his Lordship's opinion that passage, if intended to enunciate a general rule, went too far. A continuing failure to perform would necessarily be equivocal; but his Lordship disagreed with the view of Nourse LJ in the Court of Appeal ([1996] QB 106 at 116-117) that failure to perform a contractual obligation was necessarily and always equivocal.

Sometimes in the practical world of businessmen an omission to act might be as pregnant with meaning as a positive declaration.

Paul Magrath, Barrister

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs People

Recruitment Genius: Management Trainer

£30000 per annum: Recruitment Genius: Exciting career opportunity to join East...

Recruitment Genius: Senior Scientist / Research Assistant

£18000 - £28000 per annum: Recruitment Genius: An ambitious start-up company b...

Reach Volunteering: Chair of Trustees

VOLUNTARY ONLY - EXPENSES REIMBURSED: Reach Volunteering: Do you love the Engl...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

Arsenal vs Borussia Dortmund

The Ox celebrates century with trademark display of speed and intuition
Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

When two worlds collide

Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?