Court Refuses to Require Parties to Follow Notice and Cure Requirements in Contract
Vinergy International (PVT) Ltd v Richmond Mercantile Limited FZC,
In the case of Vinergy International (PVT) Ltd v Richmond Mercantile Limited FZC, The High Court has refused to require that the party who terminated a contract for the repudiatory breach of the other party follows the notice and cure requirements set out in the contract.
The Facts
Richmond had a long term agreement to supply products to Vinergy. In return, Vinergy had to buy all its requirements from Richmond. Richmond purported to terminate the agreement for Vinergy's repudiatory breach, on the basis that Vinergy had bought products from a third party. A repudiatory breach is a very serious breach that goes to the heart of the contract. Any party can terminate for repudiatory breach under common law.
In this contract, as in many, there were other rights that the parties had agreed in respect of termination. This included an express right to terminate for failure to observe any terms and where the breach was still occurring, despite having given the other party at least 20 days to cure it.
The High Court Decision
The High Court rejected Vinergy's argument that the express termination procedure, including the notice and cure provisions, should apply to the common law right to terminate for repudiatory breach. Whether the notice and cure would be required for repudiatory breach was a matter relating to the construction of the contract in question. Here, nothing suggested that a repudiatory breach should be subject to the same requirements as the contractual termination rights and there was no need to imply such a requirement.
Comment
This ruling suggests that it may be possible to require notice and cure periods for repudiatory breaches if the parties expressly agree that. However in reality, as a repudiatory breach is so serious as to go to the heart of whether the contract should continue, the parties are unlikely to want to allow the party in breach a right to correct in such circumstances.