Jet2.com Ltd v SC Compania Nationala De Transporturi Aeriene Romane Tarom SA

A contractual termination clause must be exercised through a communication which makes its nature and purpose sufficiently clear, particularly where non-compliance causes termination. A payment deadline is not a condition of a long-term services contract merely because the contract permits termination for non-payment after a grace period. Time is of the essence only where the contract or circumstances clearly require it. A party may accept a repudiation even for a mistaken reason. However, conduct must be assessed objectively and in context; commercial negotiations, uncertainty and attempts to preserve a valuable contract do not necessarily amount to renunciation, and conduct may amount to affirmation. Damages for accepted repudiation are assessed at acceptance by asking how the contract would probably have been performed, assuming performance within the contractual framework and regard to the parties’ commercial interests.

Jet2 claimed damages for breach of a contract under which Tarom was to provide heavy maintenance services for Jet2’s aircraft. Tarom purported to terminate under article 12.1(b), alleging unpaid invoices, after earlier correspondence concerning payment and proposed contractual amendments.

Jet2 accepted that the contract had ended but alleged that Tarom’s termination was itself a repudiation. It also alleged that Tarom’s earlier communications constituted anticipatory breach, while Tarom argued that Jet2 had affirmed the contract and that the parties had mutually agreed to terminate. The court had to decide whether Tarom’s notice was valid, whether Tarom had a common-law right to terminate, whether there had been an earlier renunciation, and the principles governing damages.

1. Termination notice. Tarom’s 31 May communication was not a valid notice under article 12.1(b). Although the clause prescribed no particular form, the consequences were severe and the communication had to make its nature and purpose clear. It did not do so. Further, the sums identified as due were materially inaccurate and were not properly substantiated when Jet2 requested clarification.

2. Common-law termination. The unpaid invoices for G-CELP did not give Tarom a common-law right to terminate. Time for payment was not of the essence. This was a long-term services contract for payment of money, and neither its terms nor the surrounding circumstances showed that punctual payment was a condition. The payment and interest provisions did not alter that conclusion.

3. Repudiation and affirmation. Tarom’s letter of 10 September was an anticipatory repudiation, which Jet2 validly accepted on 18 September despite giving a reason for acceptance which it no longer relied upon. Tarom’s earlier meetings, negotiations, correspondence and July letters did not, viewed objectively and in context, amount to a renunciation. In any event, Jet2’s continued treatment of the agreement as alive, motivated by its desire to retain the favourable contractual rate, affirmed any earlier repudiatory conduct.

4. Damages. The court had to determine how the contract would have been performed if Tarom had not repudiated it. It had to assume contractual performance, consider the surrounding economic and commercial circumstances, and assess how Tarom would have acted in its own interests and in good faith. Damages were assessed at the date Jet2 accepted the repudiation, with liability extending in principle to the losses arising from the loss of the contract until its contractual expiry. Quantum was left for further argument.

5. Tarom’s counterclaim was allowed in the agreed sum of US$227,316.55. Its late claim for contractual interest required separate pleading and was not determined.

Not an appeal. The judgment was a first-instance decision of the High Court (Commercial Court).