Contracts, Termination, Repudiation and Rescission

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Presumably this means a "payment arrangement" is also regulated by the Act, otherwise a notice served under S87 makes no sense (the wording required by the 1983 Regs requires that DNs are served under regulated agreements).

I think it's a pity that creditors "terminate" agreements, because if they merely restricted credit while keeping agreements live we would not have these apparently contradictory positions. The point being that a lender "terminates" but actually doesn't because he still wants to be able to serve DNs down the line if the debtor "defaults" on an arrangement.

It seems that the lender isn't "terminating" at all, he's just restricting credit. Service of TNs is, in my view, hugely misleading if this is the case.

What a total mess the Act is. I used to think Mr Bennion was a genius...now I just think he was mental.

Re: Contracts, Termination, Repudiation and Rescission

Hi
Thought i would see what the OFT had to say about default notices being isued on contracturally terminated accounts. This is the reply.

Dear Mr Bard

Thank you for your e-mail of 21 March 2011 to the Office of Fair Trading (OFT).

In reference to your enquiry, I have spoken with our credit team who have provided the following information.

The creditor could issue a default notice or could continue with the termination provisions if there is no amount due on default. The creditor can serve a notice of default sums under Section 86E of the Consumer Credit Act while continuing with the termination procedure.

I hope this information proves helpful.

Yours sincerely

Gurpriya Tooray
Enquiries and Reporting Centre


This was my query


Dear Sirs

I wonder if you could answer this for me.
We have a member who has had his credit card terminated under the contractual term in his agreement, he is not nor has ever been in arrears.

Does this mean that if in the future he falls into arrears and breaches the payment arrangement the creditor will be unable to issue a default notice and terminate s the account is already terminated.

PeterBard

TCU



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[diddydicky]

Re: Contracts, Termination, Repudiation and Rescission

In relation to Egg's non default ending of many thousands of agreements, what does the forum think of this comment from Lord Justice Moore-Bick (para 34):



Taken from http://www.bailii.org/ew/cases/EWCA/Civ/2009/75.html

This case confirms that the starting position is that a contractual termination clause, however detailed, will not exclude an innocent party’s common law right to treat a contract as discharged and seek damages, following a sufficiently serious breach. Typically, the circumstances in which termination is permitted under the contract will be regarded as events that the parties have decided correspond with breaches that the common law would recognise as giving rise to similar rights.

OR

It is inherent in the nature of a legally binding contract that each party expects to obtain the benefit of the bargain into which he has entered, or, if the contract is not performed, a right to recover compensation in the form of damages for the loss of that benefit. Accordingly, in a case where one party's breach is such as, in the words of Diplock L.J. in Hongkong Fir Shipping Co. Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26, to deprive the other of substantially the whole benefit which it was intended that he should obtain from the contract, the common law recognises the right of the injured party to treat the contract as discharged and to recover damages for the loss of the bargain. Such a breach is commonly described as "going to the root of the contract". That is all trite law, but it provides the underpinning, should it be required, for Mr. Boyd Q.C.'s submission that parties to a contract of this kind, or indeed to any contract, enter into negotiations in the expectation that if the one of them commits a breach which goes to the root of the contract in the sense just described, the other will be entitled to recover damages for the loss of his bargain. The parties may, of course, agree to depart from that position, but that is the point from which they start.
------------------------------- merged -------------------------------
In my view Mr. Dunning's submission fails properly to recognise the true nature of the contract. The primary purpose of Article 10 in the present case is to provide an agreed measure of compensation for breaches of contract by way of delay in delivery and deficiencies in capacity and performance which, although important, do not go to the root of the contract. For these the parties have agreed the payment of liquidated damages which are to be deducted from the final instalment of the price and to that extent their agreement displaces the general law, at least as regards the measure of damages recoverable for a breach of that kind. However, they have also agreed that there comes a point at which the delay or deficiency is so serious that it should entitle Gearbulk to terminate the contract. In my view they must be taken to have agreed that at that point the breach is to be treated as going to the root of the contract. In those circumstances the right to terminate the contract cannot sensibly be understood as anything other than embodying the parties' agreement that Gearbulk has the right to treat the contract as repudiated, with (subject to Mr. Dunning's alternative argument) the usual consequences. The same holds true in relation to the Yard's right to terminate the contract under Article 5.7. Although the parties may have agreed to exclude, in whole or in part, Gearbulk's right to recover damages for a repudiatory breach on the part of the Yard, I am unable to accept that they intended to create by their contract a situation which differed in its effect from that which would arise on the acceptance of a repudiation under the general law. Article 5.9 and Article 10 simply identify the circumstances in which one or other of the parties is entitled to treat the contract as discharged by the other's breach. In paragraph 88 of his judgment in Stocznia Gdanska S.A. v Latvian Shipping Co [2002] EWCA Civ 889, [2002] 2 Lloyd's Rep. 436 Rix L.J. expressed the view that where contractual and common law rights overlap it would be too harsh to regard the use of a contractual mechanism of termination as ousting the common law mechanism, at any rate against a background of an express reservation of rights. In this case I would go further. In my view it is wrong to treat the right to terminate in accordance with the terms of the contract as different in substance from the right to treat the contract as discharged by reason of repudiation at common law. In those cases where the contract gives a right of termination they are in effect one and the same.

[Garlok]

Re: Contracts, Termination, Repudiation and Rescission

Hi basa48,

There is also issue in the "Lambie" case where their Lordships also made reference to Common Law of Contract rights when the CCA was involved. The quote above as some of us have been trying to say for a while gives a good indictaion of the thinking of the senior courts when it comes to matters such as these. There have now been several quotes from the higher courts on here on both sides of the Law fence (Common/CCA) which say that exactly the same thing i.e. what matters is what the debtor has been led to believe by the actions of the creditor.

regards
Garlok

[basa48]

Re: Contracts, Termination, Repudiation and Rescission

In relation to Egg's non default ending of many thousands of agreements, what does the forum think of this comment from Lord Justice Moore-Bick (para 34):

"it is impossible for a party to terminate a contract, in the sense of discharging both parties
from further performance, whether by invoking a term which entitles him to do so or by
exercising his rights under the general law, and at the same time treat it as continuing,
since the two are inconsistent. Either the primary obligations remain for performance, or
they do not";

Taken from http://www.bailii.org/ew/cases/EWCA/Civ/2009/75.html

This case confirms that the starting position is that a contractual termination clause, however detailed, will not exclude an innocent party’s common law right to treat a contract as discharged and seek damages, following a sufficiently serious breach. Typically, the circumstances in which termination is permitted under the contract will be regarded as events that the parties have decided correspond with breaches that the common law would recognise as giving rise to similar rights.

[pandora]

Re: Contracts, Termination, Repudiation and Rescission

Thanks again LA for your kind observations and well received help .... what a confusing subject DNs are ... glad there are those who can decify here to help all of us novices !!!

Any other thoughts keep 'em coming !!!

P:beaglex

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Just focusing on a few facts that we are reasonably sure of...

If the DN is bad there can be no enforcement (Harrison), therefore the creditor must issue a new DN.

To issue a new DN, the creditor (or assignee) needs to ensure that they are able to deal with remedy; ie, the contractual position when the breach is put right. If the default is remedied per the DN, then S89 applies and the contract should continue as before.

However, your contract may already provide for this; ie, a term that states that the current balance can be assigned and the contract closed, assuming that the regs are observed. If it doesn't contain any such term, then I have no idea what the assignee can now do, other than sell the debt to a licenced creditor provider.

IMO, it is the OC that is at fault, and the debt should only have been assigned once the debt itself was beyond dispute.

I also looked at the Arrow Global code of practice (2009), which states that;

Each member shall:

a) Timely advise the consumer that the debt has been assigned.
b) Adhere to all relevant requirements under the Consumer Credit Act 2006 and any other relevant legislation.
c) In debt collection or trace activity comply with all the principles of this code.

So how they now adhere to b) above while trying to collect a debt which they cannot now enforce is really quite hard to understand.

[pandora]

Re: Contracts, Termination, Repudiation and Rescission

The new owner is Arrow Global - Freds doing the dirty work of sending the "pay us some money" letters.

I assumed (without legal knowledge I must add), that Arrow Global would not be able to issue my OH with a new DN - (with say him satisfying the DN - and they then becoming his Creditor) - as they are not a regulated lender as the OC (a bank) was - but the I'm not au fait with DCA rights post sale.

Also, AG - if they issue a corrected DN - would then have to have the previously recorded DN removed, as technically my OH would have satisfied it. But, the orig DN was registered under the banks name - so IMHO I would think that it would need to be the bank whom originally registered the DN, to also give direction to the CRAs to remove it.

The account was sold by the bank during dispute, a CCA was supplied with some areas we wanted clairification of .... the bank never responded to any letters - and the next we knew my OH recd a letter from AG - advising him of the sale from the bank to themselves.

We have responded to them advisng of the dispute, and that the account was illegally sold by the bank whilst our complaint remained unresolved, also advising that the account had been (pre-sale) unlawfully repudiated and terminated by the bank following their failure of the issued DN, to comply with the terms of The Consumer Credit Enforcement, Default and Termination Notices) Regulations 1983 (as amended in 2006) . They were also advised that by vitrue of this breach, all future benefits under s87(1) had been forfeited (although I didn't inform them that they were entitled to genuine arrears at the time of default .... thats for me to know and them to find out !!)

They have not challenged this or even acknowledged this area of my response to them, and just sent at the beginning of the year, a template "lets come to an arrangement" requeste.

Whilst they are not baying for blood just yet ... I think it would be wise for me to just have a bit of knowledge following recent developments, and to have something already prepared to respond to anything AG or Freds may now come up with.

P :beagle:

[pt2537]

Re: Contracts, Termination, Repudiation and Rescission

I am thinking that he can never be put back in the orig position (ie with the opportunity to satisfy the DN and continue as before) as the owner of the debt is not a regulated lender - so I would think unless the debt was bought back by the OC the new owner who is a DCA is stuffed on enforcing .... or am I over simplifying things ?? (my head hurts !! :tinysmile_hmm_t2

P :beagle:

Hmm, tricky this one,

The CCA does not as far as i know (although i understand there are amendments being added that may change things here) prevent a creditor from restricting further advances.

So it is possible you could be placed in the position you ought to be by this DCA.

I note you say not a regulated lender? do you mean unlicensed?? if so then this is a criminal offence pursuant to s39 CCA 1974

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

Many thanks LA for your detailed yet easy to understand and absorb, explanation .... xx

Its my OH loan that is the basis of my q, my own debts have rubbish CCAs, which were all defaulted on dud DNs to boot - but my defence is very much the dud CCAs.

My OH had a loan that was defaulted on a dud DN (whilst in dispute) and terminated. It was then sold to a DCA, who have provided the docs showing the assignment.

So in his case it really is a mess - as the OC sold a disputed debt to a third party, following it being defaulted with CRAs by them on the back of a very dud DN - I am thinking that he can never be put back in the orig position (ie with the opportunity to satisfy the DN and continue as before) as the owner of the debt is not a regulated lender - so I would think unless the debt was bought back by the OC the new owner who is a DCA is stuffed on enforcing .... or am I over simplifying things ?? (my head hurts !! :tinysmile_hmm_t2

P :beagle:

Well, I know some will disagree, but I think you are right and the assignee will have to somehow transfer the account back to the OC in order for a new DN to be served.

Some will say that a DCA that does not hold a credit licence can serve a DN, but I do not see how this can be. The wording that the 1983 regs require to be inserted into the DN mean that, if the debtor remedies, then the contract continues as before. But how would this happen where the debt is assigned to an organisation with no credit licence? It cannot be done - it is a nonesense.

Remember that a DN is "Served under S87(1) of the CCA", etc. An unlicenced business cannot go around serving out documents that embody regulations which do not concern it.

The point here is that the OC is in error - he should not have assigned the debt to an unlicenced organisation in these circumstances. This is just my opinion; maybe there is a legal explanation for this?

[pandora]

Re: Contracts, Termination, Repudiation and Rescission

Many thanks LA for your detailed yet easy to understand and absorb, explanation .... xx

Its my OH loan that is the basis of my q, my own debts have rubbish CCAs, which were all defaulted on dud DNs to boot - but my defence is very much the dud CCAs.

My OH had a loan that was defaulted on a dud DN (whilst in dispute) and terminated. It was then sold to a DCA, who have provided the docs showing the assignment.

So in his case it really is a mess - as the OC sold a disputed debt to a third party, following it being defaulted with CRAs by them on the back of a very dud DN - I am thinking that he can never be put back in the orig position (ie with the opportunity to satisfy the DN and continue as before) as the owner of the debt is not a regulated lender - so I would think unless the debt was bought back by the OC the new owner who is a DCA is stuffed on enforcing .... or am I over simplifying things ?? (my head hurts !! :tinysmile_hmm_t2

P :beagle:

[Garlok]

Re: Contracts, Termination, Repudiation and Rescission

Hi LA

I don't think there will ever be real clarity on these subjects and we really are in the basic principle of Common Law that a case stands or falls on its own merits.

Even when a specific is sought as in the "Carey" case it all quickly becomes a debacle.

Perhaps we need several cases of complex compound defences to come our way and then we would see how the dN/termination argument fits into thinking.

regards
Garlok

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

This is a great comprehensive thread - but in a nutshell could anyone advise ...

If you receive a dud DN - followed by termination (with the CCA being compliant to The Act) - where that leaves you now ? ie if matters procceed before a Judge.

i.e as termination doesn't count (if I've read correctly) - on the back of a DUD DN - and as long as they eventually present a correct DN before proceedings, do you now have no defence at all (i e - is the defence re a bad DN and the creditor being entitled to only arrears at the time of termination, now dead in the water ? )

Thanks all....

P :beagle:

I think the view now is that the creditor cannot enforce where the DN is bad (as per PT's Harrison judgement). Any such claim, should it reach court, must be dismissed.

The creditor can, I think, serve a new DN but he cannot do this at court or less than 14 days before court (AFAIK, based on PT's analysis).

If he serves a new DN there still seems to be a lack of clarity as to what the amount demanded on the DN will be. Personally I cannot see this being anything other than the original arrears, but I know this view is not shared.

If the creditor has "terminated", then it is even more unclear what the position is. To serve a new DN, I would say that the contract must be live and open, so the creditor would clearly have to accept he made a mistake by terminating, probably remove some adverse data, and assume that you are happy for the agreement to continue. Again, others will disagree with this view, and say that the creditor can just discontinue his action, serve a new DN with an amount that would be the same as though the agreement had continued, pretend that his termination was a mistake and expect you to just swallow it.

My thoughts on this are very strongly based on S140 and the bias caused by the creditor's errors; the debtor would not be able to cancel an agreement and expect it to be resurrected a year or two later, so why should the creditor? Moreover, the debtor is making decisions largely based on what information is supplied by the creditor; if what is supplied is based wholly on an error, then those decisions may be more beneficial to the creditor rather than the debtor.

Anyway, that's how I see it at the moment. I'm sure others will have different views. It would be very worthwhile studying the Harrison judgement in detail.

I would also have a look at this post from PT;

http://www.legalbeagles.info/forums/...&postcount=204

which details what costs could be considered.

I would also think about S13 of DPA for a possible claim for compensation if the default has been recorded with the CRAs but the default record was inevitable due to the creditor's error. This might apply if a new DN is served and is remedied - you may have a claim for compensation for the period when the erroneous record was on your file.

HTH

[pandora]

Re: Contracts, Termination, Repudiation and Rescission

This is a great comprehensive thread - but in a nutshell could anyone advise ...

If you receive a dud DN - followed by termination (with the CCA being compliant to The Act) - where that leaves you now ? ie if matters procceed before a Judge.

i.e as termination doesn't count (if I've read correctly) - on the back of a DUD DN - and as long as they eventually present a correct DN before proceedings, do you now have no defence at all (i e - is the defence re a bad DN and the creditor being entitled to only arrears at the time of termination, now dead in the water ? )

Thanks all....

P :beagle:

Re: Contracts, Termination, Repudiation and Rescission

Hi basa,

Re your post above no. 679. I have argued this before and have always been "shouted down" shall we say on the basis that "CCA law is different from the Common Law of Contract" and that "Contract" can never apply in CCA disputes. But something has to govern the circumstances of a "non-agreement" ??????

Whether I actually agree is irrelevant really, the point remains to be proved. However it IS an established principle of the Common Law of Contract that should a contract be breached so that it is legally declared void, in my humble view, exactly what happens when a CCA dispute arises and the agreement is found defective, then Common Law requires that the parties to that void agreement/contract are returned to the exact position that they were in prior to the existance/inception of the flawed contract, i.e that there should be no benefit, gain or loss by EITHER party.

Therefore any CC agreement which has any maturity to it would have to be looked at right back to the date of its inception, all purchases and cash withdrawals would have to be paid for but there can be no gain on behalf of the alleged creditor, he has no right to the interest and charges he has collected on the way nor is he entitled to the income he has generated from the collection of such charges and interest. You then get into a similar scenario of statutory interest and interest in restitution as is often discussed on these forums about crdit card charges.

I think you would find in most cases of a mature "agreement", it is in fact the alleged debtor who is owed monies from the creditor.

Some points to ponder if you enter the minefield of Contract Law and I suspect why the banks try to steer clear at every turn.

regards
Garlok

Hi
Yes in a case like this the agreement would be rescinded (Futoro), this is an equitable remedy used by the courts, this means that any liabilities on the contact at the time of termination would be due but nothing further. So in the case of a credit card all the interest upto the termination date would be payable

Peter
------------------------------- merged -------------------------------

There should be a whole raft of arguments as to the ability to issue a fresh DN on a running credit? account that for all intents and purposes has been closed for some time.

If they reissue and the debtor is able or wants to satisfy the arrears how could the debtor ever be put back into the same position as they were prior to the adverse reports on their credit file being made after the expiry deadline of the faulty DN?

It just can't be done.

Doesnt have to be cone of course section89 does not mean anything ike that.

Peter