Vinergy International (PVT) Limited v Richmond Mercantile Limited FZC concerned a Master Supply Agreement (the “MSA”) entered into in 2008 under which Richmond was contracted to supply products to Vinergy.
In the event of a breach “capable of being remedied” the MSA entitled the innocent party to terminate the MSA by giving not less than 20 days’ notice, providing the party in default did not remedy the breach within that period. The MSA also provided that termination would not prejudice the rights of action in respect of any prior breach of the MSA.
Richmond purported to terminate the MSA in 2012 on the basis that Vinergy had breached provisions of the MSA relating to exclusivity and payment. Richmond did not give a default notice (or, at least in the case of some of the breaches, the notice of termination was given before the expiry of the 20 day period for remedy).
Richmond commenced arbitration proceedings and claimed damages. Vinergy denied liability and argued that Richmond had unlawfully terminated the MSA. Vinergy counter claimed for damages.
The arbitration tribunal held that:
- There had been three repudiatory breaches by Vinergy
- Richmond had lawfully terminated the MSA
- Richmond was entitled to sums which had fallen due for payment and damages
Vinergy appealed.
The Court had to decide whether Richmond was able to rely on the common law right to terminate the MSA by reason of a repudiatory breach and avoid having to comply with the notice and remedy provisions.
Vinergy argued that the lack of notice made Richmond’s termination unlawful and a wrongful repudiation of the MSA. Vinergy did not argue that the MSA excluded the common law right to terminate for repudiatory breach, but submitted that if such a right existed it had to be exercised in accordance with the MSA, i.e. by giving notice.
The Court held that the notice provisions were not intended to apply when a party sought to exercise its common law right to accept a repudiatory breach: there were no terms expressly referring to a repudiatory breach and there was no basis upon which a term requiring notice to be given could be implied.
Further, the MSA made it clear that rights of action in respect of any prior breaches remained unaffected by termination, which was consistent with the position at common law.
The Court also rejected Vinergy’s position on the basis that the termination provisions in the MSA referred to breaches which were “capable of remedy” and in any event one of Vinergy’s repudiatory breaches was not cable of remedy.
COMMENT: This decision confirms that the courts will not exclude common law contractual remedies such as the doctrine of repudiatory breach unless such exclusion is clearly supported by the terms of the contract. Contracting parties should therefore ensure that their agreed intentions are clearly set out.
