What is Repudiation?

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In the construction industry, contracts underpin projects and relationships. When one party fails to meet their contractual obligations, it can lead to project delays, additional costs, and disputes.

One way a party may fail to meet their duties is through repudiation of the contract. But what exactly is repudiation, when does it occur, and what should you do if it happens on your project

 

Understanding repudiation

Repudiation refers to when one party communicates, through words or conduct, that they intend not to perform some or all their remaining duties under the contract. This may include expressly stating they will not undertake certain works or behaviour that shows they have gone ‘off contract’ and will not honour the agreed-upon terms.

Repudiation does not mean the contract is terminated. The innocent party can choose either to accept the repudiation (ending the contract) or affirm the contract still stands and seek remedies. More on the options later.

 

When does repudiation happen?

There are two types of repudiation – anticipatory breach and actual breach.

Anticipatory breach is when a party announces in advance they will not perform some or all their future obligations. For example, a builder states they will not undertake any further works due to a payment dispute.

Actual breach is when a party fails to meet obligations when performance is due, such as when a contractor does not achieve milestones by the completion date required under the contract.

In both instances, the innocent party has a choice in how to respond.

 

What to do if repudiation occurs

If you are faced with an anticipatory or actual breach, consider the following:

  • Seek prompt legal advice on the meaning of the repudiation and the options available.
  • Notify the repudiating party in writing, identifying the problem and making time of the essence to remedy the breach.
  • Evaluate the severity of the breach and the importance of the obligations not being met.
  • Determine whether to accept the repudiation, end the contract, or affirm it continues – based on the impact on the project.
  • If accepting repudiation, consider the next steps to complete works, including claims for losses against the repudiating party.
  • If affirming the contract continues, warn that damages will be sought for losses flowing from the breach.

Listen to the Barton Legal Podcast, where Bill Barton discusses repudiation in episode four, and provides practical guidance on handling repudiation.

 

You can find the Barton Legal Podcast on the following platforms:

 

 

Repudiation can significantly impact construction projects where timing and certainty are critical.

Understanding what it is and promptly obtaining legal advice enables the innocent party to make informed choices to progress works while preserving their rights.

The team at Barton Legal has extensive experience dealing with repudiation and securing remedies for clients whose projects have been impacted. Get in touch today for bespoke advice: https://bartonlegal.com/site/contact

 

Please note, this article and any accompanying video or presentation are for educational and marketing purposes only. It must not be used for giving advice in any shape or form, and it is not a substitute for legal advice. The author does not accept responsibility for loss howsoever occasioned to any person or persons acting or refraining from action as a result of this material.