The Elective and Automatic Theories of Termination in the Common Law of the Contract of Employment: Conundrum Resolved?

Publication Date01 Nov 2013
AuthorDavid Cabrelli,Rebecca Zahn
DOIhttp://doi.org/10.1111/1468-2230.12049
The Elective and Automatic Theories of Termination in
the Common Law of the Contract of Employment:
Conundrum Resolved?
David Cabrelli and Rebecca Zahn*
If a party to an employment contract commits a repudiatory dismissal or resignation, it has long
been unclear whether the other party has the option either to terminate or affirm the contract (the
elective theory) or whether the former’s breach operates to bring the contract of employment to
an end (the automatic theory). The recent decision of the Supreme Court in Société Générale
(London Branch) vGeys has finally resolved this question. By a majority, the Supreme Court held
that the elective theory also applies in the context of a wrongful repudiation of the employment
contract by express dismissal or resignation. This note examines the significance of Geys in the
context of the common law of the contract of employment and evaluates whether a number of
related issues surrounding the breach and termination of the employment contract have been
resolved.
INTRODUCTION
Under general contractual principles, if one party commits a repudiatory breach
of contract, the other party has the option either to terminate or affirm the
contract: this is referred to as the ‘elective’ theory of termination.1However, it
has long been unclear whether the same principle of election applies in relation
to a wrongful dismissal or resignation in breach of an employment contract or
whether the law should prefer a theory based on automatic termination. The
‘automatic’ theory posits that one party’s unilateral repudiatory breach operates
to bring the contract of employment to an end, thus depriving the innocent party
of the right of election. Both approaches had found favour in the common law
at various times,2and because the Court of Appeal had adopted the elective
theory with uncharacteristic diffidence in the most recent leading authority,3the
law was subject to the charge that it lacked certainty or clarity in the absence of
a definitive pronouncement at the highest appellate level on the matter.
The recent decision of the Supreme Court in Société Générale (London Branch)
vGeys4(Geys), handed down on 19 December 2012, has finally resolved this
*David Cabrelli is Senior Lecturer in Commercial Law at the University of Edinburgh. Rebecca Zahn
is Lecturer in Law at the University of Stirling.
1White and Carter (Councils) Ltd vMcGregor [1962] AC 413; Photo Production Ltd vSecuricor Transport
Ltd [1980] AC 827.
2InGunton vRichmond-upon-Thames London Borough Council [1981] 1 Ch 448, the Court of Appeal
preferred the elective approach, whereas in Sanders vErnest A Neale Ltd [1974] ICR 565 (Sanders),
the National Industrial Relations Court opted for the automatic theory.
3InBoyo vLambeth London Borough Council [1994] ICR 727, 743H–744A per Ralph Gibson LJ, there
was a begrudging acceptance that it was bound by the earlier decision in Gunton ibid as a matter of
precedent.
4 [2013] 2 WLR 50.
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Conundrum Resolved?
© 2013 The Authors. The Modern Law Review © 2013 The Modern Law Review Limited.
1106 (2013) 76(6) MLR 1094–1128

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