What is repudiation?

Published Date
Jul 31, 2017

Whether your counter-party has actually repudiated its contract is a big question. If you wrongly treat a contract as having been repudiated and so stop performing that contract yourself, you may face a claim for breach of contract.

In Vitol v Beta Renowable, Vitol had agreed to buy biofuel from Beta, but Beta had then said it would not be able to deliver in full. Vitol accepted this repudiatory breach by not nominating a ship to carry the biofuel (which it was contractually obliged to do) and later sending notice of termination. Beta argued that Vitol’s failure to nominate a ship did not amount to acceptance of a repudiatory breach, it was just oversight. Further, it did not amount to clear and unequivocal conduct that showed Beta the contract was over, and Vitol should have sent notice of termination sooner.

If you have a party which appears to have repudiated your contract, you have to make it clear that you have accepted that repudiation (if that is what you decide to do). It doesn’t matter how you accept – no particular form of words is needed, and acceptance can be by conduct alone. This can include the innocent party not performing. In all cases, it is fact specific whether repudiation actually happened.

Here “albeit not without some hesitation”, the judge found that acceptance was not sufficiently unequivocal. There was no express acceptance, there was a failure to act in the context of parties who had varied their contracts before and where negotiations were continuing. Most particularly Vitol had referred to future rights to sue Beta, and had said nothing about its own failure to nominate a ship. The judge found that the failure to nominate had been deliberate and not an oversight. But this did not matter. What mattered was that is was equivocal.

The message is clear. If you have decided to accept a repudiatory breach, say so.

This post was written by Rainer Evers, part of the group of three that set up this blog, who sadly passed away on 23 September 2017. 

Content Disclaimer
This content was originally published by Allen & Overy before the A&O Shearman merger