Anticipatory Breach
A seller and a buyer have entered into a contract. Prior to the start of the contract, the buyer informs the seller that he no longer requires his goods. The seller writes back stating his intention to store the goods until the contract expires and then sue for a breach of contract. The buyer replies with an angry letter stating that he could just sell the goods to someone else. Advise all parties.
Hochster v De la Tour (1853) 2 El. & Bl. 678 established the doctrine of anticipatory breach whereby a contract can be terminated and sued upon before the time for its performance has arrived by an expressed statement from the promisor that 'he does not intend to perform his obligation.'1 Anticipatory breach differs from 'actual' breach as while under actual breach, i.e. by performance, the contract has been breached, as far as the law is concerned anticipatory breach does not constitute a breach by itself as it has to be accepted by the promisee or the promisor does fails to perform his part of the contract once the time for such performance has arrived.2
To repudiate a contract based on anticipatory breach it has to be established 'beyond any reasonable doubt'3 that there is an 'absolute refusal to perform his part of the contract.'4 The first letter written by the seller seems to be in good faith. However, it might be hard to argue that there is a lack of intention on the part of the seller to not perform his part of the contract. On the contrary, it seems that is exactly what he wishes and that becomes rather clear in the second letter. Nonetheless it might not be described as an 'absolute refusal to perform his part of the contract' as after being advised by his solicitor, or perhaps after realising the loss that he might incur due to the damages he might have to pay, he may change his mind.
Before advising either the seller or the buyer, the cases of Federal Commerce and Navigation Co. Ltd v Molen Alpha Inc. [1989] 1 Al ER 307 and Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd [1980] 1 All ER 571 have to be considered. The contrasting decisions in these two cases, while the facts seemingly similar, has given rise to much criticism. It seems peculiar therefore that Richard considers it as a distinctive case, or in his own words: 'it might be better to confine the decision in Woodar to the circumstances of that case.'5
However, Cheshire, Fifoot and Furmston (2006) distinguishes these two cases, amongst other facts, based on time. In Molena Alpha there was a high time pressure, which perhaps does not apply to Wimpey, as in Molena Alpha 'the gap between repudiation and performance was short.'6 In Wimpey, the available time could be considered to be a minimum of two months, while in Molena Alpha there hardly was any time available. It could therefore safely be suggested that, based on the facts of the scenario, a month is not as highly pressurised as far as time is concerned. However, the time consideration may be argued both ways depending on how long the 'gap' has to be in order for the courts to consider it as highly pressurised.
One of the reasons for a favourable decision in Wimpey might be that: 'their intention was 'qualified' by or 'conditional' upon the outcome of ongoing court proceedings.'7 This could also be applied towards advising the buyer as it may be argued that his intention is qualified upon consulting his solicitor or even the ongoing court proceedings, in which case the seller might find himself in a difficult position. Furthermore, Lord Wilberforce differentiated between a 'threatened breach' as in Molena Alpha, and when 'a party exercised what he... believed to be a right under contract' as in Wimpy. The scenario we are concerned with might not involve any terms within the contract which could give the buyer's action legitimacy. Therefore it may be assumed that the facts on which this advice is based are more like Molena Alpha's. A 'threatened breach' has been made by the buyer which the seller has refused to accept, choosing instead to affirm the contract. The seller certainly has such an option, however, it is highly not recommended.
The analogy with Molena Alpha can also be drawn in as far as the seller may run a risk of perceiving the anticipatory breach as an actual breach. The seller therefore needs to be prudent, especially if he decides to simply store the goods, but also if he chooses to mitigate the loss and sue for the difference. Such risk might be mitigated if the seller delivers the goods and abides by the contract until it expires, as shown by White and Carter (Councils) Ltd v McGregor [1962] AC 413. However, such action might be considered by the courts as rather harsh on the buyer. Moreover, the buyer may try and prohibit the seller from entering his premises through an injunction not to trespass on his property as was the case in shown by Hounslow Borough Council v Twickenham Garden Developments Ltd. [1971] Ch 233
However, even if the seller is able to leave the goods outside the buyer's premises, the above case states that: 'White and Carter only applied where... the innocent party had a legitimate interest in completing the contract.' It is not clear whether the seller has a 'legitimate interest in completing the contract.' Based on the facts available it may be suggested that there is no indication that the seller has such 'legitimate interest', rather than claim damages.
Based on the above analysis therefore, the advice to the the buyer would be to consider whether he finds it desirable to go forward with an expressed anticipatory breach while being aware that he might have to compensate the seller for any losses of profit that the seller may incur. The advice to the seller would start with a strong recommendation that he does not simply store the goods, while making him aware that he does have such an option, but that the chances of succeeding in such a claim are very slim, if any, if he has no 'legitimate interest', be that financial or otherwise 'in completing the contract'. The advice to the seller would recommend that he tries and mitigates his losses and then sue the buyer for the difference in price after communicating to the buyer his acceptance of the repudiation.
