Posts Tagged ‘repudiatory breach’

Delay in accepting repudiatory breach.

June 27, 2013

InĀ Cheung Ching Ping Stephen v Allcom Ltd ([2010] 2 HKLRD 324, CA) S and P entered into a provisional sale and purchase agreement. P paid an initial deposit of $1 million. The agreement provided that if S were to fail to complete it would refund the deposit and pay a further $1 million as liquidated damages.

S failed to complete on time. P wrote twice to S, reserving its rights but seeking information as to S’ progress in dealing with the matters that had to be attended to before completion could take place. After two months, P wrote to S to withdraw from the transaction. P sought the return of the deposit and the further sum of $1 million by way of liquidated damages.

The first question was whether P had lost the right to accept the repudiatory breach by waiting for two months. It was held that this delay did not mean that it had lost the right to accept the breach. The question was whether the delay was only consistent with an affirmation of the contract (or perhaps whether something material had happened in the interval between the breach and the acceptance of it) ([21]). P was entitled to accept the breach despite the delay.

P was not entitled to the $1 million by way of liquidated damages. There was nothing to show that this was a genuine pre-estimate of the damage caused by S’ breach. This was an application for summary judgment. There was to be an enquiry as to damages and the question as to whether $1 million was a genuine pre-estimate could be argued at that enquiry.

Michael Lower