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BOOK REVIEWS - Liu: Anticipatory Breach

Lloyd's Maritime and Commercial Law Quarterly

BOOK REVIEWS

ANTICIPATORY BREACH. Qiao Liu, D Phil, Senior Lecturer in Law, University of Queensland, Adjunct Professor of Comparative Law, Xi’an Jiaotong University. Hart, Oxford (2011). xxxv and 227 pp, plus 6 pp Bibliography and 7 pp Index. Hardback £55.
The doctrine of anticipatory breach is of both theoretical and practical importance. This book offers a thorough and thought-provoking examination of the subject, and is a welcome addition to contract law literature. Although it may seem a somewhat narrow topic, there is more than enough to keep the attention of the reader. It is a scholarly work which examines the leading cases critically and in detail. It deserves a wide audience.
Part I analyses the history of anticipatory breach. It rejects the theory that an anticipatory breach is a present, actual breach of an implied promise not to do anything inconsistent with the contract (Hochster v. De la Tour (1853) 2 El & Bl 678). Instead, the author persuasively argues that an anticipatory breach is a breach of the contractual obligations yet to fall due: anticipatory breach is established by an objectively reasonable inference that the contractual obligation will not be performed when due.
In Part II Liu expands upon how an anticipatory breach can be established. The discussion of the contrasting approaches of the House of Lords in Federal Commerce & Navigation Ltd v. Molena Alpha Inc (The Nanfri) [1979] AC 757; [1979] 1 Lloyd’s Rep 201 and Woodar Investment Development Ltd v. Wimpey Construction UK Ltd [1980] 1 WLR 277 is particularly valuable. In the former, it was held that an anticipatory breach would be found if the conduct went to the “root of the contract”; if the anticipated breach is fundamental, the intentions of the party in breach are irrelevant. In Woodar, by contrast, their Lordships preferred an approach grounded in intention, focusing upon whether a party had displayed an intention not to perform the contract. These cases have long been difficult to reconcile, and Liu rightly criticises the law as being uncertain in this area. After a careful analysis, Liu unsurprisingly concludes that The Nanfri is to be preferred. The fundamental breach approach provides greater certainty.
Part III examines the notion that the innocent party must “elect” between “accepting” the breach and “affirming” the contract. Ultimately, Liu is critical of such language. He argues that the focus should simply be on whether the innocent party’s termination of a contract is justified by an existing anticipatory breach, or whether the innocent party has relinquished his right to accept the anticipatory breach. Thus, the crucial question should be whether the victim is bound by a representation not to rely on the anticipatory breach; such a question seems to belong within the realm of estoppel. This interesting approach appears entirely principled. But, although a shift of the law in this direction may be welcome, it is doubtful whether the long-established language of “election” will readily be discarded.
Part IV of the book may gain the most attention. It deals with the important subject of remedies. A wide range of issues is canvassed. Regarding damages, the discussion of Golden Strait Corp v. Nippon Yusen Kubishka Kaisha (The Golden Victory) [2007] UKHL 12; [2007] 2 AC 353; [2007] 2 Lloyd’s Rep 164 is particularly illuminating. Liu’s approach may be familiar to readers of this Quarterly ([2006] LMCLQ 17; [2007] LMCLQ 273). Essentially, he argues that the bare majority of the House of Lords was correct to decide that, when assessing damages for anticipatory breach, it is permissible to take into account facts which actually happened after acceptance of the breach. Liu suggests that the minority approach, which favoured the idea that the damages payable “crystallised” upon acceptance of the breach, elevates certainty to too lofty a perch: certainty should be trumped by the need to avoid unfair over-compensation. This is obviously controversial; it is not clear that considerations of certainty do not merit greater weight in the commercial context (cf M Mustill, “The Golden Victory—some reflections” (2008) 124 LQR 569).
The same tension between what Liu terms the “compensation principle” and certainty can be found in the discussion of White & Carter (Councils) Ltd v. McGregor [1962] AC 413. Liu refers to the “White & Carter principle”, which appears to describe the principle that the innocent party
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