A breach of contract will not always be terminal to a contractual relationship. Sometimes the breach can be remedied – but what does that mean?
This was considered by the Court of Appeal in England in the recently reported case of Bains v Arunvill Capital Ltd [2020] EWCA Civ 545, in which it was held that the expression of an intention to perform was not sufficient.
The case concerned a party to a consultancy agreement who was in material breach of contract for refusing to provide services in accordance with the contract. The relevant clause in the contract provided that the agreement could be terminated in the event of a material breach which was not remedied within 21 days of a written notice being served. Mr Bains responded to the notice advising that he intended to perform his obligations, but he was found not to have remedied the breach. It was determined that, as the material breach was a refusal to work, he would have needed to actually perform the services in order to remedy this.
It should be noted that the case was determined on its own facts and circumstances and it was acknowledged in the decision that it does not raise any issues of principle concerning the application and interpretation of material breach clauses. However, it demonstrates that there may be circumstances in which the terms of an agreement, and the nature of the obligations which have been breached, are such that the mere expression of an intention to carry out those obligations will not be enough to remedy the breach.
Although this case was not decided in the context of the coronavirus disruption, given the number of businesses who may be struggling to fulfil their contractual obligations at the moment, the decision may be a timely reminder of the importance of ensuring that the right steps are taken to remedy a breach. There will be contracts in which parties are excused from performing their obligations due to, for example, the application of a force majeure clause. However, in many instances this will not be the case and parties may find themselves in breach of contract and facing termination.
In the present circumstances it may be more convenient to provide assurances that, although there has been a breach, the obligations will be performed, for example, once government restrictions are eased. However, whether this is sufficient will depend upon the terms of the contract and the nature of the relevant obligations. As the Bains case demonstrates, actual performance may be required in order to remedy a breach.
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