Contracts, Termination, Repudiation and Rescission

[Guest]

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

[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.

[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

[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

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.

[Guest]

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

[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.

[Guest]

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

[Hurricane Puffrose]

Re: Contracts, Termination, Repudiation and Rescission

BUMPED

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

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

Surely "rescission" is the un-making or winding back of a contract, which is possible in law as Pumpkinhead OTR discovered. If an agreement is rescinded the aim is simply to restore both parties to the point prior to the formation of the contract, AFAIK. I see nothing "wrong" with this if both parties agree.

As for "repudiation", this can and does happen on a regular basis, on both sides. In SeeThumb's case, it seems that the OC no longer wants to perform the contract and has ended it without an apparent contractual entitlement. I would very much doubt whether the contract doesn't have such a clause but assuming it doesn't and there was no default, then the default termination notified to SeeThumb is in effect a breach of contract for which s.170 doesn't apply because we are not looking at faults in observing the regs.

It seems that SeeThumb now has the option of accepting the termination and entering into discussion to rescind equitably, or of claiming that it is a breach of contract and that the agreement should continue. If the former, and as the OC acted to end the contract, then the bank cannot expect to be rewarded by receiving unclaimed interest from lending the money elsewhere. The bank would be unfairly enriched through its failure to observe the contract. If the latter, then I think that SeeThumb has to look to s.140 as I do not see any other route under CCA. S.140 offers a route to effectively rescind the agreement anyway, by discharging liabilities.

The other factor is DPA, which opens up the possibility of a claim under s.13 if adverse data is recorded.

But this might be academic anyway because the OC could always revoke the termination and simply serve a notice under S98A restricting credit, getting SeeThumb to repay the capital plus contractual interest as per the t&cs of the contract. However, if the termination is accepted then this might be difficult.

The last point is the contract itself. Is there really no termination clause SeeThumb? Also, is there a provision allowing restriction of credit? It's worth remembering that CCA is regulating a contract, and so has no effect where there is no provision.

LA

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

Surely "rescission" is the un-making or winding back of a contract, which is possible in law as Pumpkinhead OTR discovered. If an agreement is rescinded the aim is simply to restore both parties to the point prior to the formation of the contract, AFAIK. I see nothing "wrong" with this if both parties agree.

No absolutely not , but this was ordered by a judge and the rescission include all sums due up to date, which i think would defeat the object.

As for "repudiation", this can and does happen on a regular basis, on both sides. In SeeThumb's case, it seems that the OC no longer wants to perform the contract and has ended it without an apparent contractual entitlement. I would very much doubt whether the contract doesn't have such a clause but assuming it doesn't and there was no default, then the default termination notified to SeeThumb is in effect a breach of contract for which s.170 doesn't apply because we are not looking at faults in observing the regs.

No it happens when the debtor, denies the debt by not repaying, i don't think that the creditor can do this as it is his money, on the contrary he would affirm the contract by enforcing it. Ending a contracts contractual entitlement is termination of contract. not repudiation.

It seems that SeeThumb now has the option of accepting the termination and entering into discussion to rescind equitably, or of claiming that it is a breach of contract and that the agreement should continue. If the former, and as the OC acted to end the contract, then the bank cannot expect to be rewarded by receiving unclaimed interest from lending the money elsewhere. The bank would be unfairly enriched through its failure to observe the contract. If the latter, then I think that SeeThumb has to look to s.140 as I do not see any other route under CCA. S.140 offers a route to effectively rescind the agreement anyway, by discharging liabilities.

The other factor is DPA, which opens up the possibility of a claim under s.13 if adverse data is recorded.

But this might be academic anyway because the OC could always revoke the termination and simply serve a notice under S98A restricting credit, getting SeeThumb to repay the capital plus contractual interest as per the t&cs of the contract. However, if the termination is accepted then this might be difficult.

The last point is the contract itself. Is there really no termination clause SeeThumb? Also, is there a provision allowing restriction of credit? It's worth remembering that CCA is regulating a contract, and so has no effect where there is no provision.

LA

The bank will say they are entitled to interest on sums loaned for the period in which they were outstanding, and the court will enforce this position, any argument that contradicts this is frankly nonsense.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

The bank will say they are entitled to interest on sums loaned for the period in which they were outstanding, and the court will enforce this position, any argument that contradicts this is frankly nonsense.

D

For a creditor to get contractual interest on a terminated agreement there must be a contractual provision to do so. CCA does not prescribe the payment of contractual interest.

For a rolling credit agreement such as SeeThumb's, the normal (or safer?) way for the OC to terminate and get contractual interest is to serve a notice under s.98A restricting credit and then, when the balance is repaid, to send another notice that ends the agreement.

I don't see any way for a creditor to get contractual interest on a terminated rolling credit agreement unless there is contractual provision to do so. The creditor can claim statutory interest, of course, which is a separate issue, and yes of course the courts will award this if the creditor is successful. I cannot see a court awarding contractual interest at 29% to a creditor who ended a rolling credit agreement 2 years earlier - the bill would be crippling and completely unfair, hence simple (not compound) stat interest (which is fair).

Fixed sum credit is different and I believe as you say here Davy.

The "repudiation" here is SeeThumb's creditor not performing the contract. Whether that is repudiation or not I don't know but it seems that by the creditor no longer wanting to perform the contract and in the absence (apparently) of a termination clause this is a fundamental breach that can best be described as "repudiatory". Not sure how else it could be described, as the term "breach" doesn't seem to go far enough.

LA

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

For a creditor to get contractual interest on a terminated agreement there must be a contractual provision to do so. CCA does not prescribe the payment of contractual interest.

True and there always is

For a rolling credit agreement such as SeeThumb's, the normal (or safer?) way for the OC to terminate and get contractual interest is to serve a notice under s.98A restricting credit and then, when the balance is repaid, to send another notice that ends the agreement.

Yes the creditor should give notice, if he doesn't it would be a statutory breach, not sending one does not remove his contractural right to charge CI, section 170 again.

I don't see any way for a creditor to get contractual interest on a terminated rolling credit agreement unless there is contractual provision to do so. The creditor can claim statutory interest, of course, which is a separate issue, and yes of course the courts will award this if the creditor is successful. I cannot see a court awarding contractual interest at 29% to a creditor who ended a rolling credit agreement 2 years earlier - the bill would be crippling and completely unfair, hence simple (not compound) stat interest (which is fair).

Yes see above

Fixed sum credit is different and I believe as you say here Davy.

The "repudiation" here is SeeThumb's creditor not performing the contract. Whether that is repudiation or not I don't know but it seems that by the creditor no longer wanting to perform the contract and in the absence (apparently) of a termination clause this is a fundamental breach that can best be described as "repudiatory". Not sure how else it could be described, as the term "breach" doesn't seem to go far enough.

LA

No not repudiatory because he is still owed money under the agreement, he has performed when he issued the loan. He refuses to advance any more, terminating the agreement.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

For a creditor to get contractual interest on a terminated agreement there must be a contractual provision to do so. CCA does not prescribe the payment of contractual interest.

True and there always is

I don't think this is correct. I have a couple of terminated CC agreements and contractual interest was not added on either. A look at the t&cs shows that there is no provision to continue to charge CI post-termination, and I think that is common for terminated CC ags. Loan agreements would be different for sure.

No not repudiatory because he is still owed money under the agreement, he has performed when he issued the loan. He refuses to advance any more, terminating the agreement.

D

In this case Davy it is rolling credit, requiring that the OC performs the contract for the duration and not just at the outset ("when he issued the loan") as you say.

SeeThumb entered into the agreement on the basis given. The OC unilaterally and without cause or entitlement ends the agreement, withdrawing the debtor's entitlement to make monthly payments and terminating without contractual provision (as far as we know).

How else can this be described, other than a repudiatory breach? And what are SeeThumb's options?

LA

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

No he performs when he issues the first loan. Goode is very clear on this.

Think about it , a creditor loans £200 on a credit limit of £300 he then terminates the contract, does this mean that he has repudiated his rights to recover his money.

I do not think a court would agree.

Agree to differ i think.

D