Court Of Appeal Clarifies And Restates Test For Repudiatory Breach Of Contract

Eminence Property Developments Ltd v Kevin Christopher Heaney [2010] EWCA Civ 1168

Is a party, who served a notice to complete making the time for completion of the essence of the sale contract, and then, mistakenly, treated the contract as at an end prior to the expiry of that notice itself in repudiatory breach thereby entitling the other party to terminate the contract? The English Court of Appeal in Eminence Property Developments Ltd v Kevin Christopher Heaney has decided that it is not. By holding that an innocent mistake made by a party in its grounds for declaring the sale contracts to be at an end was not a repudiatory breach of contract because it did not demonstrate a clear intention by that party to abandon the contracts and/or refuse altogether to perform them, the Court of Appeal has brought some comfort to those of us who find the whole area of repudiatory breach of contract a potential minefield.

Background to the dispute

The dispute in Eminence arose out of a set of contracts for the sale and purchase of property made between the owner of an apartment block in Bristol (Eminence) and a property developer (Mr. Heaney). While the contractual completion date was not in dispute, the contract provided that time was not of the essence until a notice to complete had been served by one of the parties. Following the conclusion of the contracts the UK property market suffered a severe downturn, as a result of which, by December 2008 Mr. Heaney was having difficulty raising the capital to complete the purchase. Unsurprisingly, he entered negotiations with Eminence to try and obtain a lower purchase price. No agreement was ever reached and the day after the contractual completion date had passed, Eminence's solicitors served notices to complete on Mr. Heaney's solicitors. However, in drafting the notices they made a "human error" and incorrectly calculated the final date for completion, stating that it was 15 December when, in fact, it should have been 19 December 2008. Mr. Heaney took no steps to complete.

On 17 December, Eminence's solicitors served notices of rescission in respect of each contract on Mr. Heaney and sought to exercise its termination rights under the contract, including claiming damages and retaining the deposits. On 18 December, Mr. Heaney's solicitors wrote back, alleging that Eminence (as vendor)'s act of rescinding the contracts constituted a repudiatory breach of contract which was consequently accepted by Mr...

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