The case of Magnet Ltd v Cape (2007 GWD 25-427) provides an interesting discussion on the various possible outcomes in a case of material breach of contract. Alistair Murdoch, one of our Solicitor Advocates, appeared on behalf of the Pursuers.
The case was one in which a kitchen supplier sought payment for the supply and fitting of a kitchen to a customer. It was accepted that there were numerous, though minor, defects in the installation, but the suppliers were willing and able to rectify these defects. Expert reports for both parties confirmed remedial works were both feasible and likely to resolve all the problems.
The Defender however was not prepared to allow the Pursuers to carry out the remedial works and insisted that the kitchen should simply be removed and that he should pay nothing. His contention was that the Pursuers were not simply in breach of contract, but rather in material breach of contract and in those circumstances the Pursuers were not entitled to insist on any performance (i.e. payment) from him.
Although rejecting the Pursuers’ primary submission i.e. that the defects were not material, the Sheriff nevertheless found substantially in their favour, awarding them £13,000 of the £14,000 sued for, by virtue of his analysis of the law on material breach of contract.
The Sheriff felt that the number of defects, combined with the disruption and time required to put them right, meant that the Pursuers were indeed in material breach of contract. However, that did not entitle the Defender simply to walk away paying nothing at all as was claimed. The Sheriff held there were also obligations on the Defender if he truly intended to rescind the contract in light of the Pursuers’ material breach.
In particular, the Sheriff held that the Defender was under an obligation to allow the Pursuers an opportunity to remedy their breach if the circumstances allowed for that. In some cases a material breach might be irretrievable; in other cases it might be curable. The present case undoubtedly fell into the latter category. However, the Defender failed to allow an opportunity for remedial works to proceed. He refused initially to speak to the Pursuers. Eventually, he did meet one of their managers when the remedial works were identified and it was agreed the works would be carried out in exchange for a payment to account. The Defender’s cheque then bounced and, the Defender reverted to insisting that the kitchen be removed. In his evidence he accepted that the kitchen was usable and indeed had been in constant use for a period of 15 months.
In the circumstances, the Sheriff held that the Defender had not performed the obligations incumbent on him if he wished to pursue the line he did at Proof. He had not at any time given the Pursuers their opportunity to put matters right, with the result that his entitlement to rescind never arose. Accordingly, he had no right to rescind and the Pursuers were entitled to rely on the contract.
The Sheriff went on to decide “as a matter of fairness” (an interesting basis for this aspect of his decision!) that the anticipated cost of the remedial works should be deducted from the full price. Evidence as to that cost was contained within the expert reports. Accordingly, the Sheriff allowed that deduction from the price even although the Defender had no pleadings or counterclaim to that effect. The Defender’s position had been that the contract was “all or nothing” but the Sheriff exercised his inherent power to award a lesser sum than that sued for.
This case illustrates that there can be varying degrees of breach of contract, and indeed different varieties or varying degrees of material breach. As so often is the case, each action must be looked at on its own merits. It is worth bearing in mind that in cases of material breach of contract, there may not be an automatic right to rescind the contract, but the circumstances may dictate that an opportunity to remedy is afforded.
The result, although it might have been unexpected in strict terms of the pleadings in the case, is also a useful illustration of the flexibility that courts can exercise in arriving at a “fair” decision!
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Alistair Murdoch
(Information posted in October 2007and may not have been updated at time of reading).