Contracts, Termination, Repudiation and Rescission

Re: Contracts, Termination, Repudiation and Rescission

Hi Me Lord,

I think this is where rescission may be seen as beneficial to a debtor...

Repudiation, followed by acceptance and therefore rescission, requires the parties be returned to a situation as if the contract had not existed. Therefore, the creditor would receive back the original amount of the loan, but if they were the injured party, they can then go on to sue for loss of earnings based on the interest rates they would have received.

The debtor would receive back the total amount of their repayments, but if they were the injured party, they could also sue for statutory interest on the the monies paid over the period in which the agreement had been observed.

The maturity of the agreement would be the major factor in the debtor following this route, as the more mature the debt, the greater the interest, and the creditor can end up paying more than they loaned.

S 140 could then also be applied, were there any significant losses or damages incurred.

Nope wouldn't work.
Simply if the creditor had not loaned the money he cold have invested it elsewhere in order for the rescission to be equitable the agreement would have to leave both parties in no worse position( de futoro).

This also ignores the fact that there would be (and could not be repudiation of contract in any case).

The only case law for successful claims of this nature are in cases where an advance was promised and then not forthcoming, the resultant losses incurred by the debtor, due to loss of trade or reputation are recoverable under common law.

We are talking about something completely different in consumer credit agreements, the "rescission" is the removal of the right to repay under the terms of the contract, more correctly it is termination of contract.

D

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

This was a conclusion reached some time ago SeeThumb - the point is, what remedies are open to you given a repudiation? As far as I can see, s.140 is all that is available under CCA. Note that s.140 applies whether the agreement is ended or not (s.140A(4)).

My limited understanding of contract law suggests that all you can claim from the OC would be your damages losses and nothing more if an action is taken outside of CCA, which I think would be risky.

Hi Me Lord,

I think this is where rescission may be seen as beneficial to a debtor...

Repudiation, followed by acceptance and therefore rescission, requires the parties be returned to a situation as if the contract had not existed. Therefore, the creditor would receive back the original amount of the loan, but if they were the injured party, they can then go on to sue for loss of earnings based on the interest rates they would have received.

The debtor would receive back the total amount of their repayments, but if they were the injured party, they could also sue for statutory interest on the the monies paid over the period in which the agreement had been observed.

The maturity of the agreement would be the major factor in the debtor following this route, as the more mature the debt, the greater the interest, and the creditor can end up paying more than they loaned.

S 140 could then also be applied, were there any significant losses or damages incurred.

Re: Contracts, Termination, Repudiation and Rescission

Basically we cannot talk about rescission or repudiation of contract within the context of a consumer credit agreement, they are inappropriate and misleading because there are always liabilities under the contract. These would have to be repaid if the contract was rescinded.

The only possible "breach of contract" that the creditor could be guilty of would be improper termination, and this could lead to an action for damages.

The problem with this in a consumer credit agreement is that there is generally a term in the agreement that permits a contractual termination, so it is down to arguing about notice not being given, only.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

It may be that it is not the validity of the notice that is key here, but the fact that a notice alleging default was served in the first place. That is, the OC used a statutory notice to carry out his breach of contract. The notice should only have been served on breach but there was no breach.

Given pt's post re s.170 and your analysis of the same it looks to me like s.170 would not apply, therefore sanctions are implied rather than ruled out.

LA

This was a conclusion reached some time ago SeeThumb - the point is, what remedies are open to you given a repudiation? As far as I can see, s.140 is all that is available under CCA. Note that s.140 applies whether the agreement is ended or not (s.140A(4)).

My limited understanding of contract law suggests that all you can claim from the OC would be your damages losses and nothing more if an action is taken outside of CCA, which I think would be risky.

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

[5.330]-[5.340]
The CCA 1974, s 170(1) merely restricts sanctions (or remedies) in respect of the breach of a requirement
made by or under this Act. In so far as an act or omission is also wrongful in some other respect, eg it is a
breach of contract, or a tort, nothing in this section operates so as to prevent an action lying in respect of that
civil wrong.

Hi Pt,

Finally got to the end of Goode's excellent clarification.

The quote above best sums up the meaning of s 170.

An error made as part of a requirement of the act does not represent a breach of contract, but merely the minor breach of a procedure which is correctable under the act.

For example, if a justified but technically faulty DN is issued with regard to a genuine default, s 170 would apply, as the issuing of a DN is a requirement of the act when pursuing a default. Outside of s 170; If, say, despite those errors the monies were paid, it would indicate that the debtor accepted the DN to have validity, and in making the payment, accepted the DN with the errors there in - no unlawful act would have taken place. If it was then contested in court that the monies were not due, as the DN had been faulty, the decision would be clear cut: as the DN (either proper or faulty) was a requirement of the act, and therefore protected by s 170, it must be dealt with within the act, and there is nothing to specify that monies paid correctly are recoverable.

An error made that is not part of a requirement of the act is not protected by s 170.

For example, where a DN is issued by the OC, but no default has occurred, the action has not been taken as a requirement of the act, but as an unchecked error. According to Goode, this would not be covered by s 170, and therefore open to action under common law, meaning that the breach will allow the injured party to take any action available, including accepting the breach as an offer of rescission.

So basically, if you follow the act correctly, a simple technical error will not be allowed to breach the overall contract, though your actions will require correction. However, if you act outside of the act in administering the agreement, it will constitute a breach of contract, and you are no longer protected by the act and open to action under common law. S 170 only applies where the act is properly observed.

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Thanks for these replies.

I think there is another issues here that probably would require a seperate thread, and that is the consequences of such a complete failure of the OC's processes to accurately process and check records, and to ensure compliance with the acts and guidance provided to govern consumer credit agreements - trying to keep it short there.

I don't know how much of a bearing this would have on my individual case, but it would, I suspect, be of great interest to the OFT as if it could happen to me, it could happen to anyone, etc. etc.

I am coming to suspect that this may be the greatest concern to the OC should this proceed to court as it is fundamental to their license.

This is I think s.140 territory. I doubt there's any mileage in claiming general naughtiness - you would probably need to stick to actionable parts of the CCA and DPA.

Bear in mind the OFT may not be too interested in individual cases, unless there are hundreds or thousands of the same complaint.

A separate thread would be a good idea. In the meantime, good luck...

LA

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Thanks for these replies.

I think there is another issues here that probably would require a seperate thread, and that is the consequences of such a complete failure of the OC's processes to accurately process and check records, and to ensure compliance with the acts and guidance provided to govern consumer credit agreements - trying to keep it short there.

I don't know how much of a bearing this would have on my individual case, but it would, I suspect, be of great interest to the OFT as if it could happen to me, it could happen to anyone, etc. etc.

I am coming to suspect that this may be the greatest concern to the OC should this proceed to court as it is fundamental to their license.

Re: Contracts, Termination, Repudiation and Rescission

Yes i think there is an issue here, perhaps it needs to be isolated from the rescission repudiation stuff on this thread though.

If a creditor terminates an agreement without the debtor being in breach, what is the debtors legal position?

The creditor is allowed to do this, although the new legislation say that he must state a reasonable cause, so what does that mean? what happens to him if he doesn't?

If the debtor maintained his contractual minimum payments would the creditor still be allowed to sue for recovery of the whole sum, more importantly even if the court ruled that the debtor only had to repay at the agreed rate, would there be a CCJ on his file when he had never even defaulted.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

It may be that it is not the validity of the notice that is key here, but the fact that a notice alleging default was served in the first place. That is, the OC used a statutory notice to carry out his breach of contract. The notice should only have been served on breach but there was no breach.

Given pt's post re s.170 and your analysis of the same it looks to me like s.170 would not apply, therefore sanctions are implied rather than ruled out.

One issue might be the risk of obtaining a 'pumpkinhead judgement' - disregarding s.170, what would the liabilities be on breach by the OC? I can't help thinking that a court would see no difference and just say that the liabilities remained, less costs.

LA

Re: Contracts, Termination, Repudiation and Rescission

Interesting. In effect, SeeThumb's creditor serves a DN which alleges a breach, but there is no breach. The OC stops sending monthly statements and demands the balance, which is presumably a breach of contract and not a failure to observe the requirements of the act, therefore s.170 may not apply in his case.

It is not a failure to observe the requirements of the act because the act doesn't say when a DN should be served. The OC hasn't failed to observe the act, he's failed to observe the contract. On reflection I don't see how s.170 applies.

The only failure to observe the act is in serving a DN that cannot comply with s.88, but that is an effect not a cause. The issue is service of the notice in the first place.

(There is also possibly an offence under CPUTR as the OC is claiming a breach which did not happen, and using that allegation to be repaid sooner and contrary to contract).

So if s.170 might be eliminated, what are SeeThumb's options...

LA

Yes although i think the issue is purely theoretical. Because there would be dispute between the parties as to the validity of the notice, and as to if the agreement had been terminated or not.

If complaint were made i suspect the court would just rule on the validity of the notice and either enforce or discontinue and tell the creditor to start again.

I don't think that the intervening actions(between issue of DN and court proceedings) would suffer any sanction, although it is a possibility I suppose.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

The act does not prohibit action being taken for contractual breach beyond the function of statute

Interesting. In effect, SeeThumb's creditor serves a DN which alleges a breach, but there is no breach. The OC stops sending monthly statements and demands the balance, which is presumably a breach of contract and not a failure to observe the requirements of the act, therefore s.170 may not apply in his case.

It is not a failure to observe the requirements of the act because the act doesn't say when a DN should be served. The OC hasn't failed to observe the act, he's failed to observe the contract. On reflection I don't see how s.170 applies.

The only failure to observe the act is in serving a DN that cannot comply with s.88, but that is an effect not a cause. The issue is service of the notice in the first place.

(There is also possibly an offence under CPUTR as the OC is claiming a breach which did not happen, and using that allegation to be repaid sooner and contrary to contract).

So if s.170 might be eliminated, what are SeeThumb's options...

LA

Re: Contracts, Termination, Repudiation and Rescission

Yes this thread carries a lot of baggage. Perhaps a thread of your own?

In any case I fear that if your argument is based on repudiation of a consumer credit agreement by the creditor it is doomed to failure.

D

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Sorry chaps,

Please don't think I am just gain saying your advice. I am grateful for everything being posted here and am taking it all on board; and am relishing going through the info Pt has put here, but I need some time there...

I am taking on board everything that is being said, but I do want to try to make it clear why I think this case is different. I am not just trying to use a faulty DN as a loophole, and I recognise that such is clearly no argument for repudiation or, indeed, much at all.

It seems that everyone comes back to that as if it is my main defence, but it really isn't. A faulty DN is a technicality and seeking it as a loophole, I agree, is a little bit futile! I've not defaulted, so in my case it is totally insignificant.

Thanks again

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

point is, where in the Act does it provide recission for breach of statutory requirement in respect of failing to comply with s87?

Thats the point, show me the provision of the act, ill accept that what is being suggested can be done, and of course that the Court of Appeal is wrong.

However, im sorry to say that despite many people trying to argue this point, i have never seen it succeed.

Thanks again.

Just to clarify once again, I am not citing failure to comply with s87 as the cause of their fundamental breach, I have just put it here to demonstrate a single part of the OC's mismanagement of this case. There seems to be an obsession with faulty DNs, not just here, and everyone seems to think that the repudiation argument is exclusively attached to them, but please understand, this is not about a faulty DN.

Any s87 failure is insignificant to the fact that they have just thrown the agreement away, and continued to act having been challenged. They have not complied with CCA 1974, they have contravened DPA 1998, they have completely failed to follow OFT guidance. They have also failed to respond to any of my messages regarding their error, and they have so far taken no action.

People may not have seen a successful rescission claim in case history before, but I doubt very much that they have ever seen such a monumental failure to provide the service and protection within a credit agreement as this. If this isn't a case of fundamental breach (that is, fundamental repudiation), then I question the terms' use in English Law. They have failed on every level and compounded their error until it has got to this stage. They offer me nothing of the agreement, but expect me to fulfill my obligations? What else can that possibly represent?

I'm not at all sure the OC will want to take this to court, as it represents a complete failure of their processes, (you'll have to trust me there, I am telling the truth) and if it can happen to me, it could happen to anybody; and that means at least the risk of the OFT requiring a review of their systems, for the greater good of the consumer. If it becomes apparent that their processes rely specifically on telephone contact by the debtor in response to errors in order to rectify data issues, then their systems will not be seen as robust enough. Quote, 'The OFT expects businesses to take all reasonable steps to ensure they have suitable business practices and procedures in place to facilitate their own compliance '.

I believe I have taken every step I can to prevent and then stop their actions, and they have done nothing. I don't believe any court will look upon their actions and inaction favourably.

They can trash my credit score, I have no plans to use any credit facilities, but ultimately, every negative step they take will be another black mark, and they will still have to make good.

I think it is fair to attempt to settle this between the two parties, but I will be taking further action through solicitors (starting tomorrow), the OFT and FOS as and when required.

Re: Contracts, Termination, Repudiation and Rescission

I find this interesting from the above.

The CCA 1974, s 170(1) merely restricts sanctions (or remedies) in respect of the breach of a requirement
made by or under this Act. In so far as an act or omission is also wrongful in some other respect, eg it is a
breach of contract, or a tort, nothing in this section operates so as to prevent an action lying in respect of that
civil wrong. The position would be the same in respect of a breach of a requirement made by or under the
Act which is also a criminal offence under some other statute. Where an offence has been committed,
whether under this Act or the general law, this section does not directly affect the capacity in which the
accused is charged. Thus he may be charged with an inchoate offence (eg conspiracy or attempt) or as a
secondary party (with aiding, abetting, counselling or procuring): Brookes v Retail Credit Card Ltd (1985) 151
JP 131, [1986] CCLR 5.

The act does not prohibit action being taken for contractual breach beyond the function of statute.

So if for instance a creditor issues an invalid DN and continues to attempt to enforce in knowledge of that error, he could be open for other civil sanction.

He would be attempting to enforce an un-terminated contract. This however would not be rescission of contract nor would he , in any way be repudiating it, in fact in the contry he would be trying to enforce it.

I suspect as stated in the above paragraph suggests the remedy would lay with the regulator, advice given on here to report such things to the OFT is I believe the correct course.

If the creditor should ignore and continue to pursue through the courts, he would suffer the sanction of having to start the whole process again.

D