White and Carter (Councils) Ltd v McGregor

An anticipatory repudiation does not, of itself, terminate a contract. The innocent party may accept the repudiation and sue for damages, or may refuse to accept it so that the contract remains in force.

Where the innocent party can perform without any need for the repudiating party’s co-operation, he may generally proceed to perform and recover the contract price as a debt. The repudiating party cannot, by unilateral refusal, convert that claim into one for damages only.

Per Lord Reid, that right may be withheld in an exceptional case if the innocent party has no legitimate interest, financial or otherwise, in performing rather than claiming damages. On the facts, no such exception was established.

The appellants supplied litter bins to local authorities and displayed advertisements on them. The respondent’s sales manager made a three-year advertising contract with the appellants. Later that same day the respondent purported to cancel it, but the appellants refused to accept that repudiation.

The appellants then prepared and displayed the advertising plates from 2 November 1957 onwards and sued for the full contract price, relying on an acceleration clause which made the whole balance immediately payable on default.

The Sheriff-Substitute held that the sales manager had apparent authority, but dismissed the action on the ground that implement of the contract was inappropriate. The Second Division refused the appellants’ appeal, treating Langford & Co. v. Dutch as binding.

The appeal to the House raised the central issue whether, after an unaccepted repudiation of a contract for services, the innocent party could proceed to perform without the other party’s co-operation and sue for the agreed price as a debt, rather than being confined to damages.

1. Appeal allowed by majority. Lord Reid and Lord Hodson held, and Lord Tucker agreed with Lord Hodson, that the appellants were entitled to recover the contract price. Lord Morton of Henryton and Lord Keith of Avonholm dissented and would have confined the appellants to damages.

2. Per Lord Reid, the general rule is settled in both Scots and English law: where one party repudiates a contract, the innocent party may either accept the repudiation and sue for damages at once, or refuse to accept it, in which case the contract remains fully in force. The repudiating party cannot, by his own act, alter the innocent party’s contractual rights.

3. Per Lord Hodson, an unaccepted repudiation is legally ineffective to discharge the contract. If the innocent party does not accept it, the contract survives for the benefit of both parties. Where no order of specific implement is needed, the innocent party may await the contractual date of performance and preserve his rights under the contract.

4. The majority held that, on the facts found, the appellants could perform the contract without any co-operation from the respondent. They did so by preparing and displaying the advertisements. In those circumstances, their claim was properly one for a debt arising under a subsisting contract, not merely a claim in damages for breach.

5. Per Lord Reid, Langford & Co. v. Dutch was wrongly decided and should not be followed. There was no general principle that contractual rights may be enforced only in a reasonable manner, nor any broad equitable or public policy rule enabling the court to force an innocent party to accept a repudiation.

6. Lord Reid added an important qualification. In an exceptional case, the court might refuse to permit continued performance if the innocent party had no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages. That exception was not made out on the findings of fact in this case.

7. The majority therefore held that the acceleration clause made the whole unpaid balance immediately due once the respondent failed to pay the first instalment in time. Since the appellants were entitled to continue performance, they were entitled to sue for the whole price. It was unnecessary to decide whether the clause was a penalty or one for liquidated damages.

8. The case was remitted so that decree could be pronounced as craved in the initial writ.

1. House of Lords: Appeal allowed by majority. The case was remitted so that decree could be pronounced in favour of the appellants.

2. Court of Session, Second Division: On 2 November 1960 the court refused the appellants’ appeal and followed Langford & Co. v. Dutch as binding authority.

3. Sheriff Court: On 15 March 1960 the Sheriff-Substitute dismissed the action. He held that the sales manager acted within his apparent or ostensible authority, but that an action for implement was inappropriate.