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Repudiatory Damages

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24 February 2009

When a contract is primarily violated then the other party is permitted to terminate that contract and damages under common law could be sought. These types of damages are generally known as repudiatory damages.

Stocznia Gdynia SA v Gearbulk Holdings Ltd in this case the Court of Appeal held that failing to deliver the ships at all, Stocznia had acted in repudiatory breach of contract.

Facts of the case: Stocznia Gdynia (Seller) failed to manufacture three ships as agreed with buyer Gearbulk (Buyer). Subsequently the contract was terminated by the Buyer by exercising his rights under contract and while exercising such rights he also claimed repayment of money already paid to the seller. Buyer did not stop here and claimed common law damages for the failure to fulfill the contract. The Seller argued that the Buyer could not seek repudiatory damages as he sought repayment of money already paid. He further argued that when a supplier primarily breaches the stipulations of a contract, the customer has a choice either to treat the contract as still in existence; or terminate and seek damages for repudiation at common law. So Buyer's exercise of the refund provision affirmed the contract as still in existence hence, he cannot now seek repudiatory damages under common law.

Decision: The High Court supported the seller's argument that there was affirmation, the Court of Appeal condemned it. While overturning the earlier decision, the Court of Appeal held that Buyer's exercise of its contractual right to terminate did not hinder, in any way, its right to claim repudiatory damages under common law. This judgment could make it easier for buyers to exercise both contractual and common law remedies at the same time when there is any termination of a supply contract.

Manmeet Singh, Legal assistant to Izaz Ali (izaz.ali@lawdit.co.uk). Izaz Ali is a commercial lawyer who specialises in information technology law and intellectual property law with an emphasis on IT, escrow and buying and selling online businesses.


About the Author

Lawdit Solicitors offer services and advice for litigation, commercial contracts, Intellectual Property and IT legal agreements. We are experts in commercial law with a heavy emphasis on Intellectual Property, Internet and e-commerce law. Lawdit is a member of the International Trademark Association, the Solicitors' Association of Higher Court Advocates and we are the appointed Solicitors to the largest webdesign association in the world, the United Kingdom Website Designers Association.



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Article Published/Sorted/Amended on Scopulus 2009-03-08 14:59:00 in Legal Articles

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