A delay by the Post Office in enforcing a breach of contract by a supplier, and continuing to deal with that supplier in the meantime, meant that they lost the right to terminate.  

Under the contract considered in the case Tele2 International Card Co SA & Others –v– Post Office Limited [2009] EWCA Civ 9, Tele2, the supplier of phone cards, was contractually obliged to provide an agreed form of letter of guarantee from its parent company to the Post Office. This was to have been given by 24 December 2003, but had not been given and on 1 December 2004 the Post Office purported to terminate the contract. The right to terminate for breach had arisen, but the parties had continued to deal with each other. The Post Office had continued dealings without, as the innocent party, taking any action to protect the breach or reserve its position. This was taken by the Court of Appeal to constitute the Post Office having elected to abandon its rights to terminate the contract for that breach.  

Indeed, by having continued the performance of the contract for a year, the Post Office was not then entitled to terminate the contract at that time invoking the, by then, one year old breach. By having given notice to terminate, the Post Office was found by the Court of Appeal to be repudiating the contract and was liable to Tele2 in damages.  

The obvious point that arises for lessors and asset financiers is how does this case sit with Lombard North Central –v– Butterworth [1987] QB 527, where continued delayed payment by the lessee was allowed to be invoked by the lessor to terminate the lease? The most obvious reason is that each late payment is a separate event and was viewed as such. However, what if there is a breach of an obligation such as that in the non-alienation clause by the lessee? In that case if the lessee sub-lets or allows another person to use the equipment without getting the approval of the lessor and the lessor allows that use after becoming aware of the breach without terminating the contract or reserving its position regarding that breach, it would lose the right to terminate later on for that breach.  

Vigilance and asset management would once again reduce that risk for lessors. If lessees are in breach tell them and reserve the position even if the contract is not terminated. The banks are, of course, doing the same sort of thing. They are looking at quite technical breaches of covenants by their customers and using them as a way to renegotiate banking facilities.