Repudiation
What repudiation of a contract means in NSW, the choice it gives the innocent party, and the risk of terminating without a proper basis.
Contract law basics / 5 min read
Repudiation is conduct by one party showing that it is unwilling or unable to perform the contract, or will only perform it in a way substantially inconsistent with its obligations. The other party can then choose to terminate the contract and claim damages, or to keep the contract on foot and insist on performance.
What is repudiation of a contract?
Repudiation is conduct by a party that shows it is unwilling or unable to render substantial performance of the contract. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115, the High Court described it as conduct evincing an intention no longer to be bound by the contract, or to fulfil it only in a manner substantially inconsistent with the party's obligations. The test is objective: whether the conduct would convey to a reasonable person in the other party's position that the contract is being renounced.
Repudiation can be express, such as a letter saying "we will not be proceeding", or it can be inferred from conduct. In Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, a landlord's unjustified delay in providing a registrable lease, together with incorrect statements and unfulfilled assurances, was held to amount to repudiation that the tenant was entitled to accept.
What is anticipatory repudiation?
Anticipatory repudiation happens before the time for performance arrives. A supplier that says in March that it will not deliver goods due in June has repudiated in advance. The innocent party does not have to wait until June to see whether the supplier meant it. It can accept the repudiation, terminate and claim damages straight away, or it can keep the contract on foot and hold the supplier to it.
What choice does the innocent party have?
Repudiation does not end a contract by itself. It gives the innocent party a choice, usually called an election:
Terminate
accept the repudiation, bring the contract to an end, and claim damages for the loss of the bargain. Both parties are released from further performance, although rights that have already accrued survive.
Affirm
keep the contract on foot, continue performing, and insist that the other party perform too. The right to damages for any breach remains.
The choice should be made promptly and communicated clearly. Conduct that treats the contract as continuing, such as asking for or accepting further performance, can amount to affirmation, and once the contract is affirmed the right to terminate for that repudiation is generally lost.
What happens if I terminate without a proper basis?
The risk runs both ways. If you treat the other party's conduct as repudiation and terminate, but a court later decides the conduct did not amount to repudiation, your own termination may itself be a repudiation of the contract. The other party can then accept it and claim damages from you. That is how a party with a genuine grievance can end up being the one found liable.
Not every refusal or delay is repudiation. A party that honestly insists on its own reading of a disputed clause has not necessarily repudiated, and delay on its own is not always enough. The question is always what the conduct, viewed as a whole, conveys about the party's willingness or ability to perform.
How should I respond to repudiation?
Read the contract first
Check for termination clauses, notice requirements and time limits, and whether time is of the essence.
Gather the evidence
Collect the letters, emails and conduct that show the other party will not perform.
Consider a notice
Where the position is unclear, a written notice asking the other party to confirm it will perform, or to perform by a reasonable date, can clarify matters before you act.
Make the election in writing
State clearly whether you terminate or affirm, and on what basis.
Mitigate your loss
After terminating, take reasonable steps to reduce your loss, such as engaging a replacement.
What does this look like in practice?
Suppose, hypothetically, a software developer is engaged to build an ordering system for a distributor over 12 months, paid in monthly instalments. In month five, the developer emails that it has "other priorities" and will resume work "when capacity allows", then misses two agreed milestones. Taken together, those facts may show an intention to perform only in a way substantially inconsistent with the contract.
A cautious course for the distributor is to give written notice asking the developer to confirm it will meet the timetable. If nothing changes, the distributor can terminate in writing, engage a replacement and claim the extra cost as damages, as explained in the guide to remedies for breach of contract.
Frequently asked questions
Not quite. Repudiation concerns a party's willingness or ability to perform the contract as a whole, while a breach is a failure to perform a particular term. A serious breach can amount to repudiation.
The breach of contract guide explains when a breach alone allows termination.
There is no fixed period, but delay is risky. Continuing to deal with the other party as though the contract continues can be treated as an election to affirm it.
If an event outside both parties' control makes performance radically different from what was agreed, the issue is usually frustration, not repudiation. An inability to perform that arises from a party's own conduct or circumstances can still amount to repudiation.
Speak with Vamp Law about repudiation
This guide is general information, not advice on your situation, and whether conduct amounts to repudiation depends on the facts and the documents. Because a wrong call can reverse the parties' positions, Vamp Law reviews the contract and correspondence in contract disputes before a termination notice is sent. Make an enquiry or call +61 431 569 686 to discuss your matter with Kyra Pastrovic.
More contract law basics
When the question has become a dispute, these are the pages on how Vamp Law acts in it.
Breach of Contract
What counts as a breach of contract in NSW, when a breach lets you end the contract, and what to do next if it does not.
Remedies for Breach of Contract
What you can recover when a contract is broken in NSW: damages, liquidated damages, specific performance, injunctions, restitution, interest and costs.
Frustration
When an unforeseen event ends a contract automatically in NSW, why frustration is rarely established, and how money paid and work done are adjusted.
In a dispute?
Talk to us about your contract
This guide explains the law in general terms. For advice on your own contract, send us the documents and we will explain where you stand.