Civil Engineering Reference
In-Depth Information
Chapter 18
Forfeiture Clauses, Repudiation and
Determination
Building contracts usually contain clauses (sometimes called forfeiture clauses) enti-
tling one party to bring the contract to an end in certain circumstances. Independently
of such clauses, contracting parties have power to determine the contract in certain
circumstances under the general law of contract. In practice there is a significant area
of overlap between these two possibilities.
Under the general law one party is entitled to terminate in certain circumstances if
the other party has broken the contract. It is not every breach which has this result,
however. Basically, the party seeking to determine must show that the other party has
either committed a breach which goes to the root of the contract or has repudiated his
obligations under it. These concepts are often difficult to apply in practice and, as the
following cases illustrate, it sometimes happens that A commits a breach which B
wrongly thinks entitles him to terminate and by taking this view commits a repudiatory
breach entitling A to terminate.
Lubenham Fidelities & Investments Co Ltd v. South Pembrokeshire
District Council & Wigley Fox Partnership
COURT OF APPEAL
(1986) 6 Con LR 85
There were two contracts in JCT 63 form. The original contractors went into liquida-
tion, and the plaintiffs, who were bondsmen, elected to perform the contract themselves
rather than pay on the performance bond. They engaged sub-contractors to carry out
the work. Because of various building defects, Wigley Fox (the architect under the
contract) wrongfully advised the council to deduct liquidated damages from interim
certificates. The plaintiffs thereupon wrote terminating the contracts for alleged breach,
and ordered the sub-contractors to cease work. The council thereupon served notice
of determination under clause 25(1), on the ground that the plaintiffs were in default
by wholly suspending the carrying out of the works without reasonable cause.
Simultaneously, the plaintiffs served notices under clause 26(1) alleging that the council
were in default by failing to make payment under the interim certificates; they then
issued a writ.
