ACTION FOR THE AGREED SUM

FACTS

D asked C to place adverts for them on bins. D called on the same day as the performance date telling C he did not want the advertising because he made a mistake during the negotiation. C ignored this communication, arranged for advertising to be placed on the bins and sued for the agreed price. D contended that, since he had repudiated before performance, C could not sue for the price but only get a remedy in damages.

OUTCOME

 C was entitled to the full contract price. When D repudiates, C could accept the repudiation (and sue for damages for breach) or refuse to accept it, meaning the contract remains in effect, as it did here. C did not have to accept the repudiation (even if it is “unfortunate” that D ended up with an “unwanted contract”) and C had a “legitimate interest” in performing the contract beyond the contract price. 

• When C could not gain the contract price: If they have “no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages”, they should not be able to “saddle the other party with an additional burden with no benefit to himself”. 

  • The legitimate interest must be beyond the contract price, as otherwise expectation damages could allow them to recover this. 

  • The “benefit” from claiming the contract price here was “small” compared to D’s loss, but there is “no duty laid upon a party [...] to vary [the contract] at the behest of the other party so as to deprive himself of the benefit given to him by the contract.”
    
    

• Protection of D when they are mistaken?: “Equity will not rewrite an improvident contract where there is no disability on either side”, as this would mean that a party would not be held to their contract unless the court thought it reasonable to do so, which would create “uncertainty” and make an action for debt into a “discretionary remedy”.

• Response to the minority: This was not a claim in damages (an unliquidated claim where C must mitigate his loss), but a claim in debt (where D owes to C a liquidated sum of money), so the mitigation rules do not apply.

DISSENTS

• Lord Morton: C’s only remedy was damages. C failed to mitigate their loss, as they “deliberately” incurred further expense “with the intention of creating a money debt which did not exist at the date of the repudiation”.
  
  

• Lord Keith: If the majority are right, X, who had his report-making contract repudiated, “perhaps before he has incurred any expense” could go ahead, do it anyway and “produce his report in order to claim in debt the stipulated sum”.

  • The innocent party has an unfettered right of election.

Clea Shipping Corporation v. Bulk Oil International Ltd (The Alaskan Trader) [1984]

FACTS

Midway through a time charterer, D sought to return the ship to C, the owners, in a repudiatory breach of contract. However, C went ahead with extensive repairs and sought an award for the contract price. C challenged the validity of the White & Carter legitimate interest test, as it was obiter (as the courts had not heard argument on it)

OUTCOME

The general rule is that an innocent party can accept or reject the repudiation, but there is a fetter on this right in “extreme” cases where C has no legitimate interest in performance over claiming damages - where the conduct must be “wholly unreasonable” (and not just “unreasonable”). C was only entitled to damages for breach, not the full contract price.

When affirmation is fettered, some say the innocent party is being obliged to accept the repudiation, but it is more accurate to say that the court, on equitable grounds, is refusing to allow C to enforce his full contractual rights. The range of remedies is restricted, not the right to elect to affirm or terminate.

• On White & Carter: “Lord Reid did not go far in explaining what he meant by legitimate interest except to say that the de minimis principle would apply. Obviously it would not be sufficient to establish that the innocent party was acting unreasonably”.
  
  

• Decro-Wall v Marketing [1971]: White & Carter does not apply where C ought to accept the repudiation and sue for damages, where damages would be an adequate remedy. This is because, by suing for the contract price, C is suing for specific performance, which should not be allowed if damages are an adequate remedy. 

[White & Carter also does not apply where the contract performance cannot occur without the other party’s cooperation].

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