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Rice v Great Yarmouth Borough Council [2003] TCLR 1

Repudiatory breaches of contract and the right to terminate.

Facts

A contractor concluded two contracts with a local council for leisure management and maintenance of sports facilities, parks, gardens, playgrounds and other facilities. The contracts were due to start on 1 January 1996 for four years. By May, the council served the first of numerous default notices, with a series of default notices being issued in June. Clause 23.2.1 stipulated that if the party “commits a breach of any of its obligations” the Council may terminate the contractor’s employment. The council sought to terminate the contract.

Issue

The question arose as to whether the Council were entitled to terminate the contract on (1) a construction of clause 23.3.1; and/or (2) the breaches, individually or cumulatively, constituted repudiatory breaches, entitling the council to terminate the contract.

Held

(1) The Court held that, as a general rule of English law, the consequences of a breach depended upon the importance of the term broken, depending on whether the term can be constructed as a condition or an innominate term within the context of the contract. On the facts, Clause 23.2.1 does not designate any particular term as a condition or indicate what terms justify termination, rather seeming to encompass all terms no matter how small or trivial. This construction would be unreasonable and without any commercial sense, and the parties cannot have intended that any breach of an innominate term entitles the innocent party to terminate the whole contract. (2) In construing whether the breaches of multiple obligations entitle an innocent party to terminate depends on whether the breach deprived the innocent party of the substantial benefit of the contract. In this case, the cumulative breaches do not justify an inference that the contractor would be depriving the council of a substantial benefit of the totality of the four-year contract, and thus cannot be considered repudiatory. Accordingly, there was no right to terminate.

Word Count: 320


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