Fundamental Breach in UK Law

This question has often arisen with regard to clauses excluding liability, in whole or in part, of the party in breach. Then the whole contract has ceased to exist including the exclusion clause, and I do not see how that clause can then be used to exclude an action for loss which will be suffered by the innocent party after it has ceased to exist, such as loss of the profit which would have accrued if the contract had run its full term.

One may safely say that the parties cannot, in a contract, have contemplated that the clause should have so wide an ambit as in effect to deprive one party's stipulations of all contractual force: to do so would be to reduce the contract to a mere declaration of intent. To this extent it may be correct to say that there is a rule of law against the application of an exceptions clause to a particular type of breach.

This is not an independent rule of law imposed by the Court on the parties willy-nilly in disregard of their contractual intention. This rule of construction is not now in principle but it has become prominent in recent years in consequence of the tendency to have standard forms of contract containing exceptions clauses drawn in extravagantly wide terms, which would produce absurd results if applied literally.

In an article 8 case where this question is reached, the ultimate question for the appellate immigration authority is whether the refusal of leave to enter or remain, in circumstances where the life of the family cannot reasonably be expected to be enjoyed elsewhere, taking full account of all considerations weighing in favour of the refusal, prejudices the family life of the applicant in a manner sufficiently serious to amount to a breach of the fundamental right protected by article 8.

(1) Where the event resulting from the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the contract, the party not in default may elect to put an end to all primary obligations of both parties remaining unperformed. (If the expression "fundamental breach" is to be retained, it should, in the interests of clarity, be confined to this exception).

But in my judgment, however extensive the exception clause may be it has no application if there has been a breach of a fundamental term. We were referred to a number of cases, the most recent of which, I think, is that decided by Mr. Justice Devlin, Smeaton Hocomb & Co. Ltd. v. Sassoon I. Setty Son & Co. (reported in 1953, 2 All England Reports at page 1471). ; and a little lower down he says this:

If the only real redress is damages, how can its measure or scope be affected according to whether the contract is regarded as still subsisting or as at an end? To preserve the bare contractual relationship is an empty formality. The difference is fundamental, for there is no legal substitute for voluntary performance.