Charisma Properties v Grayling (1994) Ltd 1996 SC 556
Citation: Charisma Properties v Grayling (1994) Ltd 1996 SC 556
Rule of thumb 1: What is the general rule over breach of contract? Minor breaches do not allow the other party to repudiate; major breaches allow the other party to repudiate. The difference between minor & major breaches can be a fine one in some circumstances.
Rule of thumb 2: Can what is typically a minor breach at common law, be contracted out of via a term to make it a material breach? Yes, it can, provided it is clearly written.
Rule of thumb 3: If you don’t pay on time for buying a house, is this a material breach of contract? Generally, no, however, if this is stated to be a material breach of contract in the contract giving the other party a right to rescind, then it can be held to be a material breach of contract.
Judgment:
The basic facts were that a conveyancing transaction for heritable property was completed. One of the terms stated that payment had to be paid within 21 days or the contract was treated as rescinded, and the final conveyancing would to transfer the named owner in the land register would not be done. The buyer did not pay in 21 days & the seller said it was rescinded. The buyer argued that there should be a 2 stage notice for payment, with them being given a reasonable period to pay. The Court held that where a clause is clearly stated like in this case then the 2 stage disposal did not apply. The seller was entitled to treat the contract as rescinded in those circumstances. Court stated the extremely important principle that where someone breaches a material term of contract, then the other party is entitled to rescind the contract, but if not they must be given a reasonable period to comply, although it was affirmed that this general position at common law could be contracted out of.
Ratio-decidendi:
“As a general rule, if there is a material breach of contract, the innocent party is entitled to rescind the contract forthwith… If the breach is such, by degree or circumstances, that it can be remedied so that the contract as a whole can be implemented, the innocent party is not entitled to treat the contract as rescinded without giving the other party an opportunity so to remedy the breach.”
The missives in that case provided "In the event that the said purchase price is not paid in full within 21 days of the date of entry, our clients shall be entitled to treat your clients as being in material breach of contract and to rescind the missives on giving prior written notice to that effect to your clients...". Lord Sutherland in his opinion on page 561 stated:-
"The only question that then arises is what meaning and effect is to be given to the word 'prior' where it appears in the clause. In my opinion it is capable of being construed as meaning that the notice of rescission given by the sellers cannot be a notice indicating that the contract has been rescinded by them at some date prior to the date of the notice. This may not have much meaning in the precise circumstances of the present case where the notice of rescission was given on the first available day when it could have been given. Cases could arise however where a period elapsed from the expiry of the 21 days before a notice of rescission was given. In such a case the precise date of rescission may be of materiality and the use of the word 'prior' shows that the rescission can only take place as from the date of the notice. I do not consider that the word 'prior' can be used to convert what is stated in the clause to be a written notice to the effect that the sellers have rescinded the missives into a written notice to the effect that the sellers have in mind to rescind the missives at some unspecified date in the future leaving open the question of what period is to elapse before the rescission is to take effect and also requiring in effect a further notice to be given indicating that the sellers have in fact decided to rescind the contract."
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.