An innocent party may reject a breaching party’s offer to remedy the breach if the offer doesn’t include enough information to make a fully informed decision. Offers must be clear, detailed and well supported.
Manton supplied Ash with a forklift truck for Ash to use in its warehouses. The truck was manufactured by a third party. Manton recommended the truck to Ash after a Manton representative visited the warehouses and measured the racking arrangements. After the truck was delivered, Ash found that it didn’t fit in the racking. Ash rejected it as not fit for purpose.
Manton suggested making the truck smaller. The proposal was unclear and didn’t include drawings, specifications or details of who would do the work. Ash’s concerns over the safety of the driver and compliance with legislation weren’t adequately addressed. When Ash rejected the proposal, Manton argued that Ash had failed reasonably to mitigate its loss.
The Court of Appeal held that Ash couldn’t reasonably have been expected to accept the offer without more information. Ash wasn’t required to request further details of the proposal and had not ‘shut the door’ on negotiations. There was nothing preventing Manton from putting forward a more detailed proposal and, had it done so, Ash would have rejected it ‘at its peril’.
In some cases, it will be reasonable for the innocent party to initiate negotiations. In other cases, where the party in breach has behaved particularly badly, it will be unreasonable for the innocent party to consider any offer.
In deciding what is reasonable, the court is likely to consider any time pressure and the parties’ relationship and experience. Where time is of the essence, there may only be one opportunity for the party in breach to make an offer before the innocent party makes other arrangements. Where the party in breach is considered an expert, as Manton was here, there may be an increased expectation for it to satisfy the other party’s concerns.
A breaching party should ensure that its offers are clear, detailed and well supported. An innocent party shouldn’t be too quick to ‘shut the door’ on any negotiations.