White and Carter (Councils) Ltd v McGregor

Repudiation does not itself terminate a contract. The innocent party may accept it and claim damages, or refuse it and keep the contract alive.

Where performance can be completed without the repudiating party’s co-operation, the innocent party may perform and recover the agreed price as a debt. The repudiating party cannot compel a damages claim merely because mitigation would reduce its liability.

Lord Reid considered that relief might exceptionally be withheld if the claimant had no substantial or legitimate interest in performance. That circumstance was neither pleaded nor proved. An acceleration clause may make the whole outstanding price immediately payable after default.

The appellants contracted to display advertisements for the respondent’s garage for 156 weeks. The respondent’s sales manager possessed ostensible authority to make the contract, but the respondent attempted to cancel it on the day it was concluded. The appellants refused, displayed the advertisements without requiring the respondent’s co-operation, and claimed the entire price under an acceleration clause.

The Sheriff-Substitute dismissed the action, relying on Langford & Co. v. Dutch. The Second Division of the Court of Session refused the appellants’ appeal. The central issue before the House was whether the appellants could disregard the repudiation, complete performance and recover the contractual price as a debt, rather than being confined to damages subject to mitigation.

By a majority of three to two, the appeal was allowed. Lord Reid and Lord Hodson allowed the appeal. Lord Tucker agreed completely with Lord Hodson. Lord Morton of Henryton and Lord Keith of Avonholm dissented.

1. Per Lord Reid and Lord Hodson, with Lord Tucker agreeing with Lord Hodson, repudiation by one contracting party does not itself discharge the contract. The innocent party may accept the repudiation and claim damages, or refuse it. If the repudiation is refused, the contract remains alive for both parties.

2. Per Lord Reid and Lord Hodson, an innocent party who can complete performance without the repudiating party’s co-operation may perform and recover the agreed price as a debt. The repudiating party cannot compel the innocent party to accept the repudiation merely because a damages claim, accompanied by mitigation, would impose a smaller liability. A general discretion to restrict enforcement to what the court considers reasonable would create unacceptable uncertainty in contractual rights.

   Langford & Co. v. Dutch, which was indistinguishable and had confined an advertising contractor to damages, was wrongly decided.

3. Lord Reid further considered that equitable relief might exceptionally be withheld where the claimant had no substantial or legitimate interest, financial or otherwise, in performing rather than claiming damages. Any interest would be assessed subject to the de minimis principle. This possible exception was not established on the findings and was not shown to command a majority of the House.

4. Per Lord Reid, the acceleration provision was a debt clause which made the outstanding stipulated price payable after an instalment remained unpaid. Since the appellants were entitled to perform and the first instalment was not paid, they could claim the whole price. Lord Hodson, with Lord Tucker agreeing, likewise regarded the alternative claim for liquidated damages as unnecessary. The House therefore did not decide whether the sum would otherwise have constituted liquidated damages or a penalty.

5. Lord Morton and Lord Keith dissented. They considered that, once the repudiation was maintained when performance became due, the appellants were confined to damages or, where available, specific implement. In their view, the appellants could not perform unwanted services merely to create a contractual debt and were required to mitigate their loss.

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

1. House of Lords: By a majority of three to two, allowed the appeal from the Second Division and remitted the case so that decree could be pronounced as craved.
2. Court of Session, Second Division: On 2 November 1960, refused the pursuers’ appeal. It treated Langford & Co. v. Dutch as binding authority.
3. Sheriff Court: On 15 March 1960, the Sheriff-Substitute held that the sales manager possessed ostensible authority but dismissed the action because implement of the contract was considered inappropriate.