Page 30 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 1: Laws of Contract

claimed £100 from the Carbolic Smoke Ball Company. They ignored two letters from her Notes
husband, who had trained as a solicitor. On a third request for her reward, they replied with
an anonymous letter that if it is used properly the company had complete confidence in the

smoke ball’s efficacy, but “to protect themselves against all fraudulent claims” they would

need her to come to their office to use the ball each day and checked by the secretary.

Mrs. Carlill brought a claim to court. The barristers representing her argued that the
advertisement and her reliance on it was a contract between her and the company, and so
they ought to pay. The company argued it was not a serious contract.
Question

Do you agree to what the company says? Justify.
(Hint: summarize this case in your word.)

1.9 Breach of Contract

A contract terminates by breach of contract. If the promisor has not performed his promise in
accordance with the terms of the contract or where the performance is not excused by tender,
mutual consent or impossibility or operation of law, then this amounts to a breach of contract on
the part of the promisor. The consequence of this is that the promisee becomes entitled to certain
remedies. The breach of contract may arise in two ways: (i) anticipatory and (ii) actual.

1.9.1 Anticipatory Breach of Contracts

The anticipatory breach of contract occurs when a party repudiates it before the time fi xed for
performance has arrived or when a party by his own act disables himself from performing the
contract.

Example: A contracts to supply B with certain articles on 1st August. On 20th July,
he informs B that he will not be able to supply the goods. B is entitled to sue A for breach of
promise.
The anticipatory breach is also known as ‘breach by repudiation’. Repudiation is a clear statement
by one party before performance is due that it cannot or will not perform a material part of the
contract obligation. Suppose that the day before your friend was to pick up the fiat that you are

promised to sell him, you sent your friend a message that you decided to sell the car to someone
else. That would be repudiation or anticipatory breach. It also would be repudiation if your
friend heard from another reliable source that you sold the car to someone else (There would be
no reason to believe that you would get it back to sell the car to your friend tomorrow). However,
it is not repudiation if one party will not perform because of an honest disagreement over the
contract’s terms.

Consequence of Anticipatory Breach

Where a party to a contract refuses to perform his part of the contract before the actual time
arrives, the promisee may either (i) rescind the contract and treat the contract as at an end, and
at once sue for damages, or (ii) he may elect not to rescind but to treat the contract operative and
wait for the time of performance and then hold the other party liable for the consequences of non-
performance. In the latter case, the party who has repudiated may still perform if he can.
The anticipatory breach of contract does not by itself discharges the contract. The contract is
discharged only when the aggrieved party accepts the repudiation of the contract, i.e., elects to
rescind the contract. Thus, if the repudiation is not accepted and subsequently an event happens

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