JAMES KEMBALL LIMITED v "K" LINE (EUROPE) LIMITED

A contractual termination clause permitting termination where a party commits a wilful, persistent or material breach ordinarily concerns an actual breach existing when notice is given. It does not extend to an anticipatory breach unless the contract clearly provides for that result.

Where a professionally drafted agreement states that a specified remedy is the sole and exclusive remedy for failure to provide minimum contractual volumes, that remedy governs and does not ordinarily permit termination for the same shortfall. The court must give effect to clear language allocating contractual risks, even if the bargain later appears commercially disadvantageous. On a hypothetical termination for breach, damages may nevertheless be at large where the contractual remedy was not preserved on termination.

The claimant provided road haulage services under a three-year service agreement. The defendant undertook to offer minimum daily volumes of work. After the defendant explained that a newly formed joint venture would take over much of the relevant shipping business, the claimant served notices alleging anticipatory repudiatory breach and purporting to terminate under the agreement’s contractual termination clause.

The claimant claimed damages for breach. The defendant relied on the agreement’s provision making a surcharge the sole and exclusive remedy for monthly volume shortfalls, and disputed both the contractual right to terminate and the alleged repudiation. The central issues were whether the termination clause applied to anticipatory breach, whether the surcharge provision excluded termination, and, alternatively, how damages should be assessed.

1. Claim dismissed. The claimant had relied exclusively on the contractual termination machinery in clause 11.3(a), rather than accepting a repudiation at common law.
2. Clause 11.3(a) permitted termination only where the other party commits a wilful, persistent or material breach. The drafting contrasted with clause 11.3(d), which expressly referred to threatening to cease business. The clause therefore required an actual breach at the date of notice and did not extend to an anticipatory breach.
3. Clause 3.3 made the surcharge the claimant’s sole and exclusive remedy for failure to provide the minimum number of jobs under clause 2.2. Read with clause 4.4, which expressly addressed when the claimant’s failures could constitute a material breach triggering termination, the agreement showed that the parties had deliberately adopted different remedies for the two risks. The claimant could not invoke clause 11.3(a) for a clause 2.2 shortfall.
4. The defendant had not breached, or threatened to breach, clause 3.3. It had expressly stated that it intended to comply with the surcharge mechanism. Nor had the defendant repudiated the agreement, since the claimant’s contractual benefit was the minimum job commitment or, in default, the agreed surcharge.
5. The court left open whether the claimant might have relied on common-law repudiation, but held that the authorities on anticipatory breach did not alter the construction of the express contractual mechanism.
6. Alternatively, if termination had been available, clause 3.3 was not expressly preserved on termination and clause 12.3 preserved damages. Damages would therefore have been at large. On the evidence and the experts’ agreed methodology, they would have been assessed at £195,140.