Repudiation of contract for breach of implied term to cooperate
Repudiation of a contract usually relates to an allegation that a breach of contract is so serious that it amounts to a breach of a fundamental term or, put another way, that it goes to the root of the contract. The case of Sanderson Limited -v- Simtom Food Products Limited is interesting as it raised an allegation of repudiation founded on a party’s intention to perform a contract, but in a manner substantially inconsistent with its obligations.
The contract related to a project for electronic software, equipment and associated services and consisted only of a two page works order. Following an agreed 12 months suspension of the project, Sanderson alleged that Simtom was in repudiatory breach for failing to cooperate in efforts to restart the project by 1 February 2017. Sanderson accepted this alleged repudiation and terminated the contract. Simtom subsequently alleged that Sanderson’s purported termination was wrong and itself a repudiation of the contract.
This is a common turn of events in repudiation cases and why it is important to be absolutely sure of your grounds for repudiation. If it is later held that the termination for repudiatory breach was wrongful then the other party may validly claim that the purported termination amounted to a repudiatory breach and an actionable breach.
The term alleged to have been breached by Simtom was not an express term. Simton was alleged to have breached an implied term to cooperate. There is authority supporting an implied duty to cooperate where performance of the contract cannot be achieved without the cooperation of both parties. However, the implied term exists only ‘to the extent that it is necessary to make the contract workable’ – Mona Oil Equipment Co v Rhodesia Railways [1949] 2 All ER 1014, 1018, per Devlin J.
In this case, the Court held that the nature of the relationship between the parties ‘required close collaboration’ and that Simtom’s failure to cooperate in restarting the project after the 12 month agreed suspension was a breach of the implied term to cooperate and amounted to a repudiatory breach.
Sanderson Limited v Simtom Food Products Limited [2019] 442 (TCC) (27 February 2019)
Posted on 03/28/2019 by Ortolan
