Repudiation is one of the most powerful yet misunderstood doctrines in Australian contract law. When a party indicates that it will not perform its contractual obligations, the innocent party can elect to terminate and recover loss of bargain damages. This article distils the leading High Court authorities, interacts them with statutory regimes such as the Australian Consumer Law (ACL), and provides practical guidance for businesses. Use this guide to recognise repudiation early, avoid wrongful termination and protect your commercial position.
Key Takeaways
Repudiation arises when a party, by words or conduct, evinces an unwillingness or inability to perform a fundamental contractual obligation
The test is objective: would a reasonable person in the innocent party’s position think the other party no longer intends to be bound
Upon repudiation, the innocent party must promptly elect to affirm or terminate; delay can mean affirmation
Termination for repudiation unlocks damages for loss of bargain but wrongful termination can itself be repudiatory
Consumer contracts governed by the ACL provide parallel statutory rights that do not displace the common law
What Is Repudiation?
Definition in Australian Common Law
Repudiation (also called anticipatory breach or renunciation) is conduct that makes clear a party will not substantially perform the contract. The High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 described it as:
“… conduct which evinces an unwillingness or an inability to render substantial performance of the contract …”
Objective Test
A subjective change of mind is irrelevant. The focus is the outward conduct assessed against the standard of a reasonable business person (Shevill v Builders Licensing Board (1982) 149 CLR 620).
Fundamental vs Minor Obligations
Not every breach suffices. Non-performance must relate to an essential term or deprive the innocent party of substantially the whole benefit of the contract.
Common Scenarios Producing Repudiation
Express statement that obligations will not be performed
Wrongful insistence on varied terms not contemplated by the contract
Failure to provide security or finance where that is an essential precondition
Persistent, serious delay indicating inability to perform on time
Distinguishing Breach and Frustration
Doctrine | Cause | Right to Damages | Effect on Future Obligations |
Repudiation | Party choice or inability | Yes – loss of bargain | Innocent party may elect to terminate |
Frustration | Supervening event beyond the parties’ control | Generally no damages (unless contract provides) | Contract automatically discharged |
Statutory Interactions
Australian Consumer Law (Cth)
Sections 259–267 ACL allow a consumer to reject goods or terminate services for a major failure. This statutory right often parallels a common-law repudiation but operates independently. Parties cannot contract out of these rights (s 64 ACL).
Building Legislation Example
Under the Home Building Act 1989 (NSW), owners and builders retain contractual and statutory warranty rights. A builder’s abandonment of works may constitute both repudiation and breach of statutory warranty.
Election on Repudiation
Affirm – continue to perform and sue for damages when the breach occurs
Terminate – accept the repudiation and end further obligations (Foran v Wight (1989) 168 CLR 385)
Acceptance must be unequivocal and communicated. Silence or delay risks affirmation (Stamford Property Services Pty Ltd v Mulpha Australia Ltd [2017] NSWCA 240).
Damages and Remedies
Expectation damages: put the innocent party in the position as if the contract were performed (Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435)
Reliance damages: recover wasted expenditure if expectation measure is uncertain
Restitution: recover benefits conferred, particularly where the contract is rescinded
Specific performance or injunction: rarely granted once termination is elected
Practical Steps for Businesses
Before Alleging Repudiation
Review the contract for notice provisions or cure periods
Collate evidence: correspondence, meeting notes, delivery schedules
Consider whether the counterparty’s conduct truly goes to an essential term
Draft a without-prejudice letter inviting performance to avoid wrongful termination risk
Accepting Repudiation
Issue a written notice: state the facts, identify the repudiatory conduct, and declare termination
Preserve mitigation records: attempts to source replacement goods or services
Quantify loss of bargain with contemporaneous market data
Avoiding Repudiation Yourself
Comply strictly with milestones and deliverables
Document any request for extension under the contract’s variation mechanism
If interpretation is genuinely disputed, seek declaratory relief rather than unilaterally suspending performance (Aslan v Stepanoski [2022] NSWCA 24)
Need advice on a potential repudiation dispute? Contact our team today for a fixed-fee initial consultation.
Frequently Asked Questions
What is the difference between repudiation and termination for convenience?
Termination for convenience is an express contractual right allowing a party to end the contract without breach; repudiation arises from wrongful conduct and enables the innocent party to terminate plus claim damages
Can silence amount to repudiation in Australia?
Yes, prolonged failure to respond or perform where time is essential can objectively signal unwillingness to be bound, depending on the contract and context
How quickly must I accept repudiation?
There is no fixed period, but undue delay or continued performance can constitute affirmation, losing the right to terminate
Are liquidated damages clauses affected by repudiation?
After valid termination, pre-agreed liquidated damages continue to apply unless expressly limited to performance phase only
Can I retract repudiation once communicated?
A repudiating party may retract before the innocent party accepts repudiation, provided the innocent party has not materially altered its position
