Repudiation

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To repudiate a contract is to indicate an inability or unwillingness to perform it in such a way as to deprive the aggrieved party of substantially the whole benefit of the bargain represented by the contract.

A “repudiatory” breach of contract is a one which is sufficiently serious to indicate a party has repudiated the contract, thereby entitling the innocent party to terminate the contract.

In this case the innocent party has two options: It can

  • accept the repudiation and treat the contract as at an end; or
  • affirm the contract and insist on performance by the repudiating party.

How serious is “serious”?

The $64,000 question: What counts as “sufficiently serious”?

Does “failure to pay an amount due by the time specified in a contract” constitute a repudiatory breach? Usually failure to pay may be a specific event of default prescribing exactly what should happen — so this question is moot — but it may apply where you have a lender of a revolving credit facility, or a prime broker.

If your contract stipulates that time is of the essence, then yes. If not, then it will depend on the circumstances. If the failure was due to a force majeure-style external event, probably not. If the failure to pay was accompanied by an extended middle finger, more likely.

See also