The High Court considered an exception to the rule that a party may rely on different grounds for termination of a contract than those initially relied on. The general rule is that a party may subsequently raise a ground for termination that was not relied on at the time that the contract was terminated. However there is an exception to the rule where the ground relied on by the terminating party is one that, if notified, could have been remedied by the other party.
The claimant C&S handled motor insurance claims for the defendant, Enterprise, but Enterprise terminated the contract for repudiatory breach when C&S refused to provide files to Enterprise's external auditor. Later it also claimed termination was justified on the grounds of C&S's poor performance, leading C&S to sue for damages. The court confirmed that a party may later justify termination on the basis of a ground not mentioned at termination. C&S argued that any breach which was capable of remedy should not be treated as a repudiatory breach, but the court rejected this argument.
It noted that it was open to the parties to agree that certain breaches should not be treated as repudiatory, but any clause which permits termination for a material breach on notice where there is a failure to remedy does not prevent a serious breach from being a repudiation justifying termination in accordance with a party's common law rights.
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