AFFIRMATION AND CONTINUING BREACHES OF CONTRACT

Stocznia Gdanska SA v Latvian Shipping Co [2001] 1 Lloyd’s Rep 537

It is clear law that a repudiatory breach of contract gives to the innocent party a choice. It can either affirm the contract (and claim damages if it chooses for the loss suffered as a result of the breach) or it can terminate the contract and claim damages for the loss suffered. That choice once made is final. However, a problem can arise where the innocent party initially affirms the contract but the breaching party maintains its stance. In such a case, is the innocent party bound by its affirmation or can it choose to terminate the contract? This issue was recently considered by Mr Justice Thomas in Stocznia Gdanska SA v Latvian Shipping Co [2001] 1 Lloyd’s Rep 537. The case concerned a ship-building contract but the principles are equally applicable to an ordinary construction contract. The answer given by Mr Justice Thomas is that the innocent party can subsequently choose to terminate the contract where the breach of contract takes the form of a continuing breach.