Pro-clad-Gordon Ltd v Wyman International Ltd [2010] CSIH 99
Citation: Pro-clad-Gordon Ltd v Wyman International Ltd [2010] CSIH 99
Rule of thumb: Can an organisation make an ultimatum to a supplier that if the supplies are not adjusted then they may consider stopping paying for them? Yes, they can, and this is not an anticipatory breach entitling the other party to damages for breach of contract.
Judgment:
The basic facts were that an organisation involved in the construction of pipelines for oil & gas was buying components involved in this from another supplier on a long term contract. The components were not doing the job well enough & required adjustments, so they put an ultimatum to their supplier that the components would have to be improved or they may stop paying for them. The supplier raised a legal action for the money owed under the contract calling this an anticipatory breach, and stating that they were making the components to the standard required under contract. The Court held that an ultimatum like this to a supplier was not sufficient to constitute an anticipatory breach – an organisation is entitled to make ultimatums of this nature to a supplier & seek to have the contract terms altered to suit their business needs.
"Where verbal or written communications are in issue, the key requirement, as we understand it, is that before a repudiation can be held to have occurred, there should be an objectively clear indication that, for whatever reason, material contractual obligations are not going to be performed at the due date. The other party to the contract would then have the option, either to accept the repudiation and consequently to rescind the affected relationship, or alternatively to insist on continued performance of the contract in its existing form. It is only where such an anticipatory breach of contract is clearly established following an objective assessment of the circumstances that the relevant option can arise at all... If a party proposes to continue on terms that are fundamentally different from the existing terms, that too will amount to a repudiation... To our mind, that statement as it stands, goes too far. We consider that a contracting party must always be entitled, especially in altered circumstances, to propose or suggest a future variation of the relevant contractual terms for the other contracting party to consider. Provided that a refusal to perform on existing terms is not simultaneously demonstrated, it does not seem to us that the mere tabling of such a proposal or suggestion will necessarily amount to repudiation of 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.