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19 May 2020
A consultant was alleged to be in material breach of a consultancy contract for refusing to supply his services. He responded to a material breach notice by stating that he was willing to perform. However, the Court of Appeal held that this was insufficient to remedy the breach (Bains v Arunvill Capital Limited).(1) According to the court, actual performance, rather than an indication of a willingness to perform, is required to remedy a material breach of contract.
Mr Bains had been appointed under an agreement to provide various financial services to Arunvill Capital Ltd. Clause 3.4 of the agreement stated that it could be terminated by a party:
[I]n the event of the other Party having materially breached any of the provisions of this Agreement and not having remedied such breach within 21 days after the service of written notice by the first Party requiring the same to be remedied.
On 5 April 2016 Arunvill gave notice to Bains that he was in material breach of the agreement as he had indicated both verbally and in writing that he did not intend to perform his contractual obligations. Bains was requested to remedy the breach within 21 days of receipt of the letter. On 20 April 2016 Bains's solicitors responded, stating that he did not accept that he was in breach and that "[w]ithout prejudice to the above, Mr Bains confirms that he does intend to perform his contractual obligations under the… Agreement and therefore you should consider a breach (if any) remedied".
Arunvill asserted that as Bains did not work or attempt to do so, the contract had been terminated on 26 April 2011 – 21 days after the service of notice.
Bains commenced proceedings.
The High Court held that there had been a material breach of contract because Bains had clearly refused to provide any further services and had asserted an intention to no longer perform his contractual obligations:
[T]he proper remedy in the circumstances of this case is not merely the communication of an intention to work in an unspecified way, but it is to continue to provide the services which the claimant was contracted to provide.
The issue before the Court of Appeal was whether Bains's solicitors' letter of 20 April 2016 had remedied the material breach within the required 21-day period. If it had not, Arunvill was entitled summarily to terminate the agreement; if it had, Bains was entitled to a termination payment equal to six months' remuneration.
The Court of Appeal confirmed that in such cases, a simple two-step process should be followed:
The court held that the specified breach was the refusal to work, which was "a refusal to provide the services in clause 2.1".
This refusal to work was an actual state of affairs and not merely a theoretical threat of how Bains might, or proposed to, act at some point in the future. It was a threat which he had carried out until the expiry of the 21-day period by not providing the contracted services. It had not been remedied by the 20 April 2016 letter containing the withdrawal of the refusal to work and the intention to perform the contractual obligations.
Therefore, the court determined, in line with the lower courts, that the remedy would have been for Bains to have provided the required services, which he did not.
The appeal was therefore dismissed.
This decision, like several cases on the right to terminate for material breach, turned on its facts. Nevertheless, it provides practical guidance on responding to notices of material breach and illustrates that a mere willingness to perform may not be adequate tender of performance.
For further information on this topic please contact Daniel Wyatt or Kirtan Prasad at RPC by telephone (+44 20 3060 6000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
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