The plaintiff was a fixed-term lender to a head-borrower, the latter on-investing the funds with its related companies. It was a term of the loan that the sub-borrowers would provide the head-borrower with first-ranking securities. The debt was advanced without the securities being in place and a little over a year later the plaintiff purported to cancel the contract on the basis that the provision of the securities was an essential term. The plaintiff claimed back most of the capital it had lent. It did not claim back all the capital because the head-borrower had in turn lent a smaller sum to the plaintiff and to a related company of it supported by a disputed guarantee.

Decision: The plaintiff was entitled to cancel the contract and seek a return of the capital it was seeking.

Held: (1) The effect of cancellation was to discharge the parties from further performance but not to divest any party of any money paid under the contract before breach (Contract and Commercial Law Act 2017, s.42 applied). (2) A court can nonetheless, as a free-standing remedy, direct a party to a contract that is cancelled to pay to the other party such sum as the court thinks just (ibid, s.43). The fact that the contract had been partially performed was not a bar to a remedy under s.43.

Comment: Section 43 (a re-enactment of the Contractual Remedies Act 1979, s.9) is a broadly drafted discretionary remedy, a principal purpose of which is to provide for restitutionary remedies, both for the innocent party and, where appropriate, the party in breach, following cancellation of a contract. It is not necessary to show that there has been a total failure of consideration. At common law on a fact pattern such as this, the lender would anyway have been able to recover (at least) its capital in an ordinary damages action. And where a contract’s principal obligations involve mere money payments both ways, the common law of restitution is also not ham-strung by the general requirement that there be a total failure of consideration (see Goss v Chilcott [1996] AC 788; [1996] RLR §248).