In the first decision, Eribo v Odinaiya, Mr Odinaiya agreed, in June 2005, to substantially refurbish Dr Eribo’s London property including decoration, upgrading fixtures, fittings and services, and installing the “PlayNest” system (which allows amongst other things the remote control of household appliances). Dr Eribo claimed damages for delays and incomplete and defective work, and argued that she was entitled to terminate the contract. Mr Odinaiya counterclaimed for sums not paid. There was some argument over the completion date and whether requests to carry out additional work entitled Mr Odinaiya to an extension of time.
The Court accepted Dr Eribo’s evidence that as she and her husband would have to move out of the property while the works were being undertaken, she wanted to be back in the property by 26 December 2005. It appears that due to delays, it was agreed that the works would be completed by the end of January 2006, though in February 2006 Mr Odinaiya sent an email promising completion by 13 May 2006. Dr Eribo eventually moved back in to the property in June 2006 but experienced power failures, internet, air conditioning and telephone faults, leaks, missing fixtures and fittings, incomplete works and other damage. In September 2006 there was a total power failure, and in October 2006 Dr Eribo commissioned a report on the state of the works. Dr Eribo relied on the report to justify terminating the contract with Mr Odinaiya.
The Court accepted that due to the fact that Dr Eribo was unable to return to the property until 6 months after the original completion date, and due to the extent of the delay and the defective work, Dr Eribo was entitled to terminate the contract. She was awarded damages of £300K.
The contrasting decision is HDK v Sunshine Ventures. Here, Mr Kurdieh agreed to carry out building works at Sunshine’s nursing home. Sunshine argued that due to non-completion and abandonment of works Mr Kurdieh had repudiated the contract entitling sunshine to terminate. Sunshine also claimed damages for defects. Mr Kurdieh counterclaimed for unpaid instalments, relying on an alleged term of the contract to the effect that where payments were not made on time the completion date was “at large”. There was the usual issue of the lack of contract documents or evidence of what had been agreed, or the scope of works to be completed, and the Judge had reservations as to the reliability of both parties’ key witnesses.
As a matter of fact, the Judge accepted that requests for additional works did entitle Mr Kurdieh to an extension of time, and as a matter of principle accepted that a persistent failure to make regular payments may amount to a repudiation of contract entitling the contractor to treat the contract as terminated. The Judge did not accept that Mr Kurdieh had abandoned the work, and therefore he had not repudiated the contract. Sunshine’s letter terminating the contract could not therefore be relied upon as accepting Mr Kurdieh’s alleged repudiation. Further, the Judge found that Sunshine had failed to mitigate its losses by failing to give Mr Kurdieh the opportunity to rectify the defects. In the circumstances, Sunshine’s claim failed, but as Mr Kurdieh had already been received payment equivalent to the value of the works actually carried out, his counterclaim failed as well.
COMMENT
If one party shows a clear indication that it no longer intends to be bound by a contract, that amounts to a repudiation. The other party may accept the repudiation and treat the contract as terminated. It can also claim damages caused by the repudiation. As demonstrated above, what amounts to a repudiation of contract is a question of fact and degree. However, as a general rule, the offending party’s behaviour must be very serious. Care should therefore be taken before taking such a drastic step as seeking to treat a contract as having been terminated. The decisions also raise the issue of mitigation of loss. Usually, a contractor should be given the opportunity to correct any defects. However, in certain circumstances, a client may reasonably lose confidence in the contractor’s willingness or ability to remedy defects satisfactorily and would therefore prefer to employ a replacement contractor. Accordingly, in the absence of express terms, a contractor cannot expect to have an unqualified right to re-enter the property to correct defects.
