Edited by Roger Halson and David Campbell
Chapter 10: Termination of contract for fundamental breach
This chapter reconsider the meaning of the seriousness of a breach of contract and its role in determining the victim’s entitlement to terminate the contract and claim loss of bargain damages. It challenges the conventional dichotomy of regarding a condition as resting upon ‘the importance of the term’ and a fundamental breach as resting upon ‘the consequence of the breach’. The chapter argues that the ‘deprivation of benefit’ test formulated by Diplock LJ in the Hong Kong Fir case should be understood as a uniform test determinative of all actual and anticipatory breaches that give rise to a right to termination of contract and loss of bargain damages. Accordingly, a term is characterised as a condition if, and only if, the parties predicate at the time of contracting that any breach of it will satisfies the test, whilst a fundamental breach of an intermediate term must be subject to the test being satisfied at the time of the purported termination of contract, following a multi-factorial assessment involving, inter alia, the actual and prospective effect of the breach. As a consequence, it is suggested that Lord Diplock’s dictum in The Afovos applies only to an express contractual right of termination but not a condition arising under common law.
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