154. Acre 1127 Ltd (Formerly known as Castle Galleries Ltd) v De Montfort Fine Art Ltd1

Repudiation—whether dishonesty relevant to the finding of repudiation—whether repudiating party can rely on innocent party’s unwillingness to perform—whether innocent party’s intention not to perform relevant to assessment of damages—common mistake—damages—loss of profit—loss of volume

This was an appeal against a judgment of the High Court awarding the seller, a company specialising on the sourcing, printing and sale of contemporary art, damages for the buyer’s breach of a rolling supply agreement (the “Supply Agreement”) entered into on 25 January 2005 and requiring minimum quarterly purchases of artwork. At the heart of the dispute lies the disputed order allegedly placed by the buyer on 19 January 2005. The judge found that it was common ground that when entering into the Supply Agreement both parties referred to the circumstance that an order had been placed on 19 January and agreed that that order was to be treated as an initial order for the first quarter under the Supply Agreement. The judge held that, by failing and/or refusing to place minimum orders, quarter after quarter, as provided for in the Supply Agreement, the buyer was in repudiatory breach of the Agreement. On appeal, the buyer contended that the seller’s demand for the performance of a non-existent order combined with the seller’s refusal to permit examination of an available stock was itself a repudiatory breach which was accepted by the buyer discharging it from any further performance. The appeal was concerned with two questions. First, should the judge have found that it was the seller who repudiated the contract by bolstering the demand for performance of the non-existent order? Secondly, even if the seller was not in repudiation of the contract, was the judge correct in the light of the situation concerning the first quarter order to regard the buyer’s failure to place orders in the second, third and fourth quarters as itself repudiatory of the Supply Agreement?