If one party to a contract threatens not to perform their obligations (i.e. repudiates the contract) the innocent party has significantly different options depending on whether they are able to raise court proceedings north or south of the border.
In many respects, the Law of Contract in Scotland and England is substantially the same.
The Scottish Courts will refer to English authorities when considering the correct approach towards interpretation of contracts as well as their legal effect.
The English position
In England, a repudiatory breach is one sufficiently serious to entitle the innocent party to terminate the contract. Where such a breach occurs, the innocent party must choose whether to 'affirm' the contract; i.e. to treat the contract as continuing or to 'accept' the breach and end the contract.
Irrespective of their choice, the innocent party has the right to claim damages, provided the choice is made without unreasonable delay and is clearly communicated to the party in breach.
In the event of persistent refusal by the defaulting party to perform the contract, the default remedy available to the innocent party would be to claim damages. An English court will not order the defaulting party to perform their contractual obligations.
The Scottish position
In Scotland, the innocent party has the same option to accept that the purchaser is not going to comply with his obligations and sue for the same damages, but they also have the alternative option to require the purchaser to adhere to their contractual obligations.
In that event, they can claim the contract price (usually with interest) while at the same time continuing to make the goods available for delivery in exchange for payment of that price.
In most cases in Scotland, the option that is followed would be to sue for damages. This will generally be for good pragmatic reasons (for example by re-selling the goods elsewhere the innocent party receives at least some payment sooner rather than later thus reducing their overall financial exposure).
A recent case in the Scottish Court of Appeal has reaffirmed the Scottish Law principles that the innocent party can force the repudiating party to adhere to the contract.
In the case of AMA (New Town) Limited against R. Law 2013 SLT 959, a property developer sued for payment of the price to be paid for a newly-built property. The developer remained willing and able to provide good title to the property in exchange for the price. The defaulting purchaser defended the action and attempted to argue that the seller's only remedy was to claim damages.
The Scottish Court of Appeal disagreed, noting that Scottish Law had always taken a different approach from that of England, and that it had never been the case that in Scotland the innocent party could be 'forced' to restrict their claim to damages by the other party who was defaulting on their obligations.
Providing the defaulting party does not have to do anything in order to allow the contract to be completed, then the innocent party is entitled, as a matter of right, to hold the defaulting party to their contractual obligations.
. While claiming damages for breach of contract may generally be the best practical remedy, there could be situations where a higher value or a more pragmatic result could be achieved by raising proceedings in Scotland to enforce performance under the contract.
. Where there is a possibility that the Scottish courts could have jurisdiction then it might be beneficial to raise court proceedings there if the alternative remedy of implement could provide a better outcome.
If you would like further information about any potential dispute with a Scottish aspect to it where one party is failing to honour its obligations, please get in touch with Graham Reid in our Edinburgh office, who can advise on what are likely to be the best options available.