Effect of the Default clause in a standard form of Contract Explained

 Effect of the Default clause in a standard form of Contract Explained

In an important decision, the important issue of default clause in standard form of contract was explained.

Lord Sumption has explained that "anticipatory breach of contract, probably more accurately referred to as “renunciation”, is a concept which can be traced back to the earliest years of the common law but was first coherently formulated in terms of legal principle in Hochster v De la Tour (1853) 2 E & B 678 in England and Howie v Anderson (1848) 10 D 355 in Scotland. In its modern form it is a response to the pragmatic concern of Victorian judges to avoid the waste of economic resources implicit in any inflexible rule which required the parties to go through the motions of performing a contract which was for practical purposes dead. The same concern informs much of the law of contract, notably in the area of frustration and remedies."

Citing UK's Sale of Goods Act, 1979 it was explained that "Sections 50 and 51 reproduce the corresponding provisions of the Sale of Goods Act 1893, and reflect common law principles which had already been established at the time of the earlier Act. Section 51(2) states the compensatory principle in the context of a seller’s non-delivery. Subsection (3) states the prima facie measure of damages where there is an available market, but it is not so much a rule as a technique which is prima facie to be treated as satisfying the general principle expressed in subsection (2)."

"Such clauses are not necessarily to be regarded as complete codes for the assessment of damages. A damages clause, like any other contractual provision, is conclusive of the matters with which it deals. It may also implicitly exclude considerations which, although not directly within its scope, cannot be applied consistently with its terms. But it is a question of construction whether the mere fact that it deals with damages means that it must have been intended to do so exhaustively, thereby impliedly excluding any considerations which it has not expressly addressed. To treat a damages clause as a complete code in this all-embracing sense is to tax the foresight of the draftsman in a way which is rarely appropriate unless the alternative is to undermine the coherence or utility of the clause."

For more details refer Bunge SA v. Nidera BV [2015] GCtR 5953 (UKSC).