Eminence Property Developments Ltd. v Heaney

A mistaken assertion that a contract has been terminated does not automatically amount to a repudiatory breach. The question is whether, viewed objectively and in all the circumstances known to a reasonable person in the innocent party’s position, the conduct clearly shows an intention to abandon and altogether refuse performance.

A premature rescission notice caused by an obvious and correctible error in calculating a contractual period did not meet that test where the recipient would understand that the sender wished to enforce, rather than abandon, the contract. The inquiry is highly fact sensitive. A wrongful termination notice must not be assessed in isolation or by a rigid rule.

Eminence Property Developments Ltd agreed to sell 13 flats to Kevin Christopher Heaney under contracts incorporating the Standard Conditions of Sale (4th ed). After the buyer did not complete, the seller served notices to complete. Its solicitors mistakenly calculated the ten-working-day completion period and purported to rescind the contracts two days before the notices expired.

The buyer accepted the purported rescission as a repudiatory breach. The Recorder held that the seller had repudiated the contracts and that the buyer had lawfully terminated them. The seller appealed. The central issue was whether the premature rescission notices, considered objectively in their full context, clearly evinced an intention to abandon and altogether refuse performance.

1. Appeal allowed. The Recorder erred in holding that the seller’s premature rescission notices were repudiatory. The correct inquiry is whether, considering all the circumstances objectively from the reasonable recipient’s position, the alleged contract breaker clearly showed an intention to abandon and altogether refuse performance.

2. The test is fact sensitive. A party’s subjective wish to preserve the contract is not decisive, but surrounding facts known to the other party may show how the conduct would reasonably be understood. The court followed the approach in Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] 1 WLR 277: a wrongful termination notice must not be assessed in isolation.

3. The seller was ready, able and willing to complete and had validly served notices to complete under the contractual procedure. The mistaken date in the covering letter was an obvious miscalculation of working days. A reasonable recipient would have understood that the seller’s solicitors had made a simple, correctible error and would immediately acknowledge it if it were identified.

4. The rescission notices were ineffective because they were served before the contractual period expired. They nevertheless did not clearly communicate an intention to insist on termination regardless of the contractual position. They referred to the contractual notices and conditions, showing an intention to enforce the contracts in accordance with their terms. The seller’s immediate response also confirmed that understanding.

5. The seller therefore did not repudiate the contracts. The buyer could not terminate by accepting a repudiation which had not occurred.

• Court of Appeal (Civil Division) — Allowed the seller’s appeal in [2010] EWCA Civ 1168. The premature rescission notices were not repudiatory breaches.

• High Court, Chancery Division, Bristol District Registry — Mr Recorder Blohm QC, sitting as a judge of the High Court, held that the seller had repudiated the contracts and that the buyer had validly accepted that repudiation.