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BREACH OF CONTRACT - Repudiation

Monday, September 30, 2019 @ 9:01 AM  


Lexis Advance® Quicklaw®
Appeal by RJG Construction (“RJG”) dismissing its action for damages for breach of contract and allowing the respondent Marine Atlantic Inc's (“Marine”) counterclaim for breach of contract. RJG contracted with the project owner, Marine, to construct a ferry wharf structure. While construction was ongoing, Marine claimed RJG was in breach of the contract by failing to complete the project by the contractual completion date. RJG denied that it was in default and continued to work on the project. Marine required RJG to enter into a remediation agreement, which RJG refused since it would have extensively altered the existing contractual relationship. Marine froze all funds owing to RJG. RJG purported to terminate the contract as a result. Marine also purported to terminate the contract, claiming RJG failed to meet the contractual timelines and purported to terminate the contract when it was not entitled to do so. RJG commenced this action. The trial judge found that RJG’s notice of default was invalid as it did not comply with the contractual requirements. As a result, RJG’s notice of termination was also invalid. He held that Marine was entitled to terminate the contract when it did.

HELD: Appeal allowed. By freezing all funds related to the project, Marine deprived RJG of substantially all that it had bargained for and thus repudiated the contract. Freezing of funds would clearly impact payment for work already performed by RJG and any future work, and was not authorized by the contract, the performance bond, or the common law. The trial judge erred in focusing on the RJG’s conduct rather than Marine’s conduct in determining whether Marine repudiated the contract. There was no contractual or common law basis on which to conclude that RJG was estopped from exercising its right to terminate the contract in the face of Marine’s repudiation. The judge erred in concluding that RJG’s failure to strictly comply with the contractual provisions disqualified it from terminating the contract. Marine’s repudiation of the contract entitled RJG to terminate the contract without reference to the contractual provisions.

R.J.G. Construction Ltd. v. Marine Atlantic Inc., [2019] N.J. No. 246, Newfoundland and Labrador Court of Appeal, B.G. Welsh, L.R. Hoegg and F.P. O'Brien JJ.A., August 12, 2019. Digest No. TLD-September302019001