STATUTES
| Author | David Williams |
| Published date | 01 September 1967 |
| Date | 01 September 1967 |
| DOI | http://doi.org/10.1111/j.1468-2230.1967.tb01159.x |
SIPT.
1967
FUNDAMENTALISM IN CONTRACT
589
in the event
of
non-performance, with the qualification that rescis-
sion is a judicial act. Swiss law
41
admits of a limited degree of
extra-judicial rescission attended by a surprising degree of forma-
lism, the purpose
of
which is to bring home to the contract-breaker
that the contract
is
about to end. American law suffers the same
doubts as English law in this respect. The
Restatement,
apropos
total breach, states that “remedial rights provided by law are
substituted by the injured party.”
42
At the practical level, doubts
have arisen as to the operation of secondary, contractual provisions
such as arbitration clauses, liquidated damages clauses and
so
forth.
To
take the dilemma posed in
Heyman
v.
Darwins Ltd.,43
if
the repudiation of the contract (including an arbitration clause) is
accepted by the party not in default
so
as to terminate the contract,
then is not the arbitration provision useless?
To
avoid such a
result, Lords Macmillan and Porter drew a distinction between
termination of contract and the right of one party to treat the
contract as ended, discussed above. Lord Macmillan considered
that the contract continues notwithstanding an accepted repudiation
because the contract provides the measure of damages, whilst the
guilty party does not repudiate the contract but only his own
obligations thereunder. Lord Wright suggested that the arbitration
clause is
“
collateral to the substantial stipulations of the contract
”
and being of purely procedural and ancillary effect is unaffected by
an accepted rep~diation.~~
A
recent example of the distinction
is Lord Justice Diplock’s division of contractual obligations into
primary obligations (discharged by performance) and secondary
obligations (arising upon non-performance of primary obligations by
one of the
par tie^).^^
Such a division allows of termination of
primary obligations in the event of an accepted repudiation, whilst
admitting of the continuance of collateral
or
secondary obligations,
e.g.,
arbitration.40 Where do exemption clauses
fit
into such a
scheme of things
?
Lord Reid was clear that an accepted repudia-
tion disables the contract-breaker from enforcing the exemption
clause. Such a view has the merit of simplicity in that
it
treats the
contract as an entity,
or,
perhaps, at a more modest level, views the
matter from the familiar standpoint of dependency of promises,
i.e.,
a party who commits a fundamental breach cannot enforce a
promise by the other party to forgo rights which would otherwise
arise. But, as Lord Reid himself warned, this is too simple.
41
Art. 167,
Riicktritt,
limited to cases where the debtor
is
in
mom;
Art. 97,
dealing with non-performance of a permanent character, gives only damages.
42
Contracts,
p.
313.
Cf. Corbin on Contracts
(5
946) states that it
is
”
not
correct to say that a total breach terminates all the primary contractual
relations and substitutes secondary and remedial ones.”
43
[1942]
A.C.
356.
44
At p. 377.
4s
C.
Czarnikow
v.
Konfos
[1966]
2
W.L.R. 1397 at p. 1416.
48
The alternative promise theory and the consensual basis of the obligation to
pay damages has been criticised by
H:
W.
R. Wade, 56 L.Q.R. 519 at
p.
526.
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