Repudiation and Misunderstandings

When a misunderstanding is not a repudiation.

What is repudiation? In a contract, for example for the purchase of a property, one party (A) says or does something that indicates that he/she will not perform the contract or is no longer obliged to perform the contract. Party (B), takes that as a repudiation or renunciation of the contract and either accepts the repudiation and terminates the contract or rejects the repudiation and insists on party A’s performance of the contract.

In Toner v Delaporte (2018) WASCA 115, the facts, briefly, were that the buyers purchased the seller’s property with a long settlement date. The parties agreed that the buyers would rent the property for a period terminating on the settlement date. Prior to the settlement date, the leasing agent for the seller sent a letter to the buyers terminating the lease, which was on a date after the settlement date.

The buyers took the letter to mean that the seller was repudiating the contract for the sale and purchase of the property and by email to the seller’s agent stated his position and demanded the refund of the deposit paid to the seller’s agent.

The seller took the position that the Buyers’ email was a repudiation of the contract.

The Court found that the Buyers had misunderstood or were confused about the intentions of the seller in terminating the tenancy and that the seller and her agent had not said or done anything to disabuse or correct the Buyer’s misunderstanding. The Court found that the Buyer’s email to the seller was not a repudiation of the contract.

Interestingly and the learning point in this case is that there may not be an act of repudiation where it is the result of a misunderstanding or incorrect interpretation of the contract (DTR Nominees Pty Ltd v Mona Home Pty Ltd).

In this case, if the seller, or any one of her representatives, had clarified the buyers misconception about the intention of the letter terminating the lease, the buyers may have recognised the error or misunderstanding and performed the contract.