Repudiation in construction contracts

Repudiation was described by Viscount Simon L.C. in Heyman v Darwins [1942] A.C. 356 as the situation where 'one party so acts or so expresses himself as to show that he does not mean to accept the obligations of a contract any further'.

In Hong Kong Fir Shipping Co. Ltd. v Kawasaki [1962] 2 Q.B. 26 Diplock L.J. described the relevant test as

'Does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as the consideration for performing those undertakings?'

The Court of Appeal in Rice v Great Yarmouth Borough Council [2000] All ER (D) 902 held that there are 3 categories of case involving repudiatory breach in the construction sphere:

1. where the parties have agreed either that the term is so important that any breach will justify termination or that the particular breach is so important that it will justify termination (usually referred to as a 'condition' of the contract);
2. where contractors simply walk away from their obligations, indicating an intention no longer to be bound; and
3. where the cumulative effect of breaches that have taken place is sufficiently serious to justify the innocent party in bringing the contract to a premature end.

Out of these 3 categories, the third causes most difficulty. It is clear that the test is a high one. Importantly, the question is whether such repeated breaches show that the guilty party will continue to deliver a substandard performance, such that the innocent party will be deprived of substantially the whole benefit contracted for.