When you enter a construction contract with a client, you put your business and revenue on the line. Repudiatory breaches can be costly, although you may not know whether you have grounds to terminate the agreement. This expert legal guide answers ‘What is a Repudiatory Breach’ and gives a typical example in construction.
Problem
A customer asked me for a quote on a painting and decorating job. Once I provided it, she agreed. She then came back and asked me to supply materials she originally intended to source. I said I would at an additional cost to the quotation, and everyone agreed.
However, I received an email from the customer explaining that her usual painter and decorator could now fit her in, and she no longer needed my services. I have already ordered and paid for the requested building materials and cannot return or use them elsewhere as they were a special order.
Can I invoice her for these materials, and what are my rights when customers accept quotes and then cancel?
Many thanks,
Ken, Somerby
Response
You and your customer entered into a binding contract when you agreed on the quotation and the additional cost of the materials. It states that you will carry out the painting and decorating works and, in exchange, your customer will pay the quoted sum. Both parties are bound by the contract’s terms and a breach could allow the innocent party to claim its losses.
A contract can have three types of terms: warranties, conditions and innominate terms. A warranty is a minor term that, if breached, allows the innocent party to claim damages from the breach but not end the contract. Conversely, a condition is a significant term at the heart of the contract, and if breached, the innocent party can repudiate and terminate the contract. Innominate terms sit between warranties and conditions.
Her rejection of your services breaches a condition of the contract and entitles you to accept the wrongful repudiation. You should respond to their email, saying that her actions are a repudiatory breach of contract that ends the agreement which you accept. Then, you can claim for any work done, including the purchased materials and any loss of profit.
What is a Repudiatory Breach?
A repudiatory breach of contract is a severe breach that means the innocent party cannot benefit from the agreement. It gives them the right to terminate the contract.
It is always good practice to identify repudiatory breaches or clauses in your contracts so that you understand both parties’ rights should they occur. If the breach is not explicitly labelled as repudiatory, terminating the contract is risky, and a court may find it unlawful.
Let the Court Decide
If your contract does not state whether a breach is repudiatory, it is up to a court to determine. They will consider the actions and inactions of the offending party to determine whether they intended to follow the contract’s terms.
Anticipatory Breaches
There are some incidents where a repudiatory breach is anticipated but has not occurred. For example, one party may refuse to comply with their obligations before the deadline.
However, to be classed as repudiatory, the anticipated breach must be inevitable. Unlikeliness is not sufficient grounds to terminate the contract.
Get Our Construction Solicitors Support
If you believe your client has made a repudiatory breach of contract, call our Construction Dispute Solicitors today. We can arrange a free no-obligation consultation to discuss your needs.
Featured Image: Pexels Licence - Cytonn Photography
