IT company awarded for client's breach

Posted: 22nd March 2019

Signing ContractWhen contractual relationships break down, there is often a dispute over which side committed a repudiatory breach thus entitling the other to terminate the contract and claim damages. The High Court confronted this issue in a case concerning dealings between an IT company and a food manufacturer.

By a simple two-page contract, the company agreed to supply software and services to the manufacturer. Difficulties quickly arose, however, and the project was suspended for a year. In the event, it never restarted. There was no dispute that the contract had been terminated by one side or the other, but each claimed that that had arisen due to the other’s repudiatory breach.

Ruling on the matter, the Court found that the manufacturer had failed to cooperate with the company’s attempts to resume the project. Although the manufacturer had not expressly renounced the contract, it had, by its words or conduct, evinced an intention to abandon the project and not to perform its contractual obligations.

As the manufacturer had committed a repudiatory breach, the company was free to terminate the contract, and did so by a solicitor’s letter. The ruling meant that the company was entitled to damages reflecting its losses arising from the breach. The amount of the award would be assessed at a further hearing.