By:- Sanskriti Jain
|England and Wales High Court||Queen’s Bench Division|
|Name of the Case||Albert Hochster Vs. Edgar Frederick De La Tour|
|Citation|| EWHC QB J72 (1853) 2 E & B 678; QB; 118 ER 922; 2 Ellis & Bl. 678 (1853)|
|Date of the Case||22nd May 1853|
|Respondent||Edgar Frederick De La Tour|
|Coram||Lord Campbell CJ|
|Act Involved||The Indian Contract Act, 1872|
|Important Section||Section 39 Of the Indian Contract Act, 1872|
We all know that a contract can be discharged by breaching it. But what if the other party renounces its liability even before the agreed date of performance of the said contract. Can you bring an immediate action against this kind of breach or you have to wait for the actual breach to happen? Is the aggrieved party still bound by the contract or it is free to find new employment anywhere? We will try to find the answers of all the question came to our mind relating to anticipatory breach or repudiation. The present case is a landmark judgement on the concept of anticipatory breach.
“An anticipatory repudiation occurs when, prior to the promised date of performance, the promisor absolutely repudiates the contract.” It is a declaration by the contracting party that he or she does not intend to carry out the contract and will no longer be bound by it. So, an anticipatory breach of contract is one that occurs before the time when the existing duty of performance is due. It is the result of words or actions indicating a desire to refuse future performance.
For example: “Mr. Shah” contracts to sell computers to “Mr. Modi” within a due date, however before the due date “Mr. Shah” gives a written application to “Mr. Modi” saying, “ I’ll not be able to deliver the computers on the promised or agreed date.”
In case of Palmeiro v. Spada Distributing Company court said “merely expressing a negative attitude toward the contract or indicating that more negotiations are necessary does not indicate that a contract should be considered to be repudiated anticipatorily.” Courts have consistently held that a breach must be specific and unequivocal; the repudiating party must demonstrate with certainty that he or she will not carry out the contract’s obligations within the time frame set out therein.
BRIEF FACTS OF THE CASE:
During the summer of 1852, Edgar De La Tour planned a three-month grand tour around Europe. He required a courier to join him on the journey, so he agreed to hire Mr. Albert Hochster as a courier and travel with him around Europe beginning June 1, 1852, for a monthly fee of ten pounds. Mr. De La Tour, on the other hand, soon changed his mind and wrote to Mr. Hochster on May 11,1852, stating that he no longer needed his services and refusing to reimburse him. Hochster sued De La Tour for breach of contract on May 22nd, 1852. Lord Ashburton then recruited Hochster on similar conditions, but not until July 4th. De La Tour argued that he could not bring an action before the date on which the contract was due to commence.
QUESTION OF LAW/ FACT:
- Were Hochster’s contractual obligations extinguished by De La Tour’s repudiation?
- Could Hochester bring a suit before June 1 (when De La Tour would have breached the contract)?
- Whether a party’s refusal to perform the agreement before the date of commencement entitled the other party to damages?
ARGUMENTS OF THE PLAINTIFF:
- A breach of contract has happened, as the defendant has shown his intentions not to fulfill his contractual obligations.
- He has the right to approach the court before the actual breach of contract happens, and as soon as the defendant shows his intentions not to fulfill the contractual obligation.
- He is free to seek new employment even before the actual breach occurs, as failure to do so may result in further harm to his economic interests, and he may miss out on employment opportunities that are made available to him.
- The defendant violated an implied contract by failing to ‘consign’ and renounce the contract prior to performance.
- Premature renunciation of a contract is contrary to the contract’s essence and substance.
ARGUMENTS OF THE RESPONDENT:
- The breach of contract hasn’t happened yet, because the actual breach hasn’t occurred until now.
- The plaintiff must not have brought the case before the actual breach occurred.
- If the plaintiff files the lawsuit before the actual breach, he must still be prepared to fulfil the contract and should not take another job until that time.
- The plaintiff was hired by Lord Ashburton, so he breached the contract, even though I didn’t, because he made the performance of his consideration impossible, and now, even if I wanted to honour the contract, I can’t.
- I am not obligated to pay damages because the plaintiff found new employment almost at the same time.
DECISION OF THE COURT AND ITS ANALYSIS
The present case (Hochester vs. De La Tour) is a landmark case dealing with Anticipatory Breach of Contract. Defendant argued that if Plaintiff is not willing to accept Defendant’s cancellation of the contract, then Plaintiff should have waited, being ready and willing to perform the contract until the time that the contract was to be performed. But Lord Campbell CJ decided in the favour of the Plaintiff and affirmed that his plea is maintainable. Court gave two types of arguments to back its judgement:-
- Doctrinal argument– Lord Campbell found no universal rule that whereby agreement and act are to be done on a future day and no action can be brought before that day if there is a breach. The court cited the examples in its support
- Short v Stone here, a man promised to marry a woman on a future day, and before that day married to another woman, he was instantly liable to an action for breach of promise of marriage.
- Ford v Tiley in this case, a man contracted to execute a lease on and from a future day for a certain term, and, before that day, executed a lease to someone for the same duration, he could be sued right away for breach of contract.
- Bowdell v Parsons here a man contracted to sell and deliver specific goods on a future day, and before the day he sold and delivered them to another, he is instantly subject to a lawsuit brought by the person with whom he first agreed to sell and deliver the goods.
The court found that when parties enter into these sorts of contract “there is a relation constituted between the parties in the meantime by the contract. And that they have impliedly promised that in the interim neither will do anything to the prejudice of other inconsistent with that relation.” And here there is “A breach of implied contract if either of them renounces the engagement.” So, we can say that De La Tour has already breached the contract when he sent the letter to decline the Hochester’s services and hence the plaintiff is free from his obligations and free to sue De La Tour.
- Economic Argument- Lord Campbell also provided an argument that involved the consideration of economics and public policy. And provided the logic for why Hochester should be free to find a new client. So, by allowing him to do so “Instead of remaining idle and laying out money in preparations which might be useless, he is at liberty to seek services under another employer”. This arrangement is good for De La Tour as well. As Hochester will be able to mitigate damages by finding new employment. De La Tour will only owe the lost wages from June 1st to July 3rd instead of being hooked for the entire summer.
Hochester as an innocent party will also not be forced to suffer any unavoidable and avoidable upfront loss. Simply, in order to retain the ability to recover damages from De La Tour, Lord Campbell also decided that there is no need to wait for months until the damages are real rather than speculative.
The public policy is also making good sense here as it’s better for the economy of people like Hochester to find new work rather than just sitting idle when another party breaches. By freeing such parties from their obligation to perform under repudiated contracts while allowing them to retain their rights to sue for any damages they have suffered, we avoid dead void economic loss.
Here the judgement of Planche v Colburn was cited to support the notion of the court.In this case, the defendants had engaged the plaintiff to write a treatise for a periodical publication. The plaintiff commenced the composition of the treatise; but, before he had completed it, and before the time when in the course of conducting the publication it would have appeared in print, the publication was abandoned. The plaintiff then filed a breach of contract case, despite not having finished the treatise.
It was argued that the plaintiff could not collect under the special contract since the treatise had not been prepared, offered, or delivered in accordance with the contract. The plaintiff might take the defendants’ renunciation of the contract as a violation and pursue an action for that violation, without considering that the contract remained in effect to bind him. According to the Court, the plaintiff might accept the defendants’ renunciation of the contract as a breach and launch an action for that breach, rather than assuming that the contract remained in existence and oblige him to execute his share of it before initiating an action for breach.
RELEVANCE TO INDIAN CONTRACT ACT
Section 39 of the Indian Contract Act, 1872 gives expression to the doctrine of anticipatory breach:-
S. 39. Effect of refusal of party to perform promise wholly.—When a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.
Section 39 lays down the option of voidability for a party in the case of the failure of the other party to perform their performance in its totality while also that if such non-performance is accepted by the promisee and they signify their assent to continue with the contract, they cannot claim that they are not excused from their own performance since the contract is invalid at any future point where they must perform. However, the promisee is entitled to the damage suffered due to the non-performance of the promisor at that singular instance. Regardless, the contract remains legal and enforceable as long as the promisee has indicated his or her acceptance, whether verbal or written. However, what must be laid down is that the promisee is entitled to compensation for the damages suffered by him due to the non-performance as per the original contract. The inheres the doctrine of anticipatory breach of contract originated in case of Hochester vs De La Tour, and enshrines its principles established the same case
This judgment introduced the concept of “anticipatory repudiation” and remedies available to the injured party. In toto, the doctrine of anticipatory breach of contract includes two basic principles: (1) that the party receiving an anticipatory repudiation of a contractual obligation may bring an immediate suit; and (2) that the repudiate in this situation need not continue with his part of the performance but may discontinue performance immediately without fear of prejudicing his right against the repudiator. However, there is a certain obligation that needs to be fulfilled before declaring an act as a repudiation so as to maintain the contract. Any minor irregularity by one party can’t be held as a breach and it should be absolute. Also, way it is the obligation of the repudiating party to communicate his intention of refusal, it is the duty of the innocent party to communicate its acceptance of repudiation or otherwise. Because the contract is between two parties, the contract as a whole, as well as the behaviour of both parties, must be evaluated in order to prove anything.
In the present case, Mr De La Tour’s abandonment of the contract was direct and absolute, but this is not always the case. As the court jotted down in its dicta, in some cases it might be beneficial for both sides. For the aggrieved party to hang on until the execution of the said act is due and not forthcoming before proceeding with a breach of contract action. However, in the case of a clear anticipatory breach of contract, the aggrieved party may also have a duty to reduce the damages caused by the breach.
In the author’s opinion, this judgement can be tagged as a very progressive judgement, as it developed a doctrine that is still practicable and helped in the augmentation of dispersal of justice to many aggrieved parties. This doctrine of a repudiatory breach is adopted by the countries like England, India and the USA, even after several years of its enunciation and are still in practice. The judgement is very clear upon the issues or question of laws raised in the case. It clarified the stance of the court and elucidated the law in the broadest sense possible. The judgement not only sought to satisfy the law’s evolution and broader interpretation of the law but also was in consensus with the public policy. Wholly the judgement has positive implications and its bearing on the future course of law forward-looking or modern.
 (1853) 2 E&B 678: 22 LJ QB 455.
 Short V Stone, (1846) 8 QB 358: 15 LJ QB 143
 Ford V Tiley, 6 B&C 325.
 Bowdell V Parsons, (1808) 10 East 359: 103 ER 811.
Sanskrati Jain, a first-year law student at Dharmashastra National Law University, Jabalpur, currently pursuing B.A.LL.B. (Hons).