Contracts, Termination, Repudiation and Rescission

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

Personally i think unlawful rescission/repudation should not be used in defence, after all you have the faulty DN or unenforacble CCA for that, especially in mine and basa's case where account was sold prior to us getting the DN. Instead it should be made as a counter claim, as you are in fact claiming the creditor unlawfully rescinded or repudated the contract and is only entitled to the actual sum due at the time of termination and not the full outstanding balance.

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

Just to clarify.

Sections 76 and 98 nor the Directive give permission to contractually terminate, that has to be contained within the contract(t and C's), all that these sections do is say that there must be warning given before they are activated.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

No section 98 applied since the act was introduced, but only on fixed term agreements section 76 applies to all agreement, both state that 7 days notice had to be given before any action was taken on the account.

The requirements introduced by the EU directive in Feb 12 were related to open ended accounts(credit cared) only, and stated that 28 days must be given before a contractual termination was activated, there were also requirements for a reason to be given for the termination.

Yes i think a creditor who has gotten as far as taking proceedings only to be halted in his tracks by the debtor confronting hem with a faulty DN may well balk at the task of reissuing a new notice and going through the whole thing again.

D

Just to clarify for those with credit card agreements terminated prior to Feb 2011;

http://www.legislation.gov.uk/ukpga/1974/39/part/VII

There is no statutory requirement for notice to be given to terminate a rolling credit agreement prior to 1/2/11. For this reason it is important to understand any contractual termination clause within the contract as CCA will not apply.

S.76 does not apply to rolling credit agreements and never has.

If a creditor has taken a debtor to court on the strength of a duff DN, the debtor still has to defend and ask the court to strike out the claim. This does not automatically prevent a further court appearance when a creditor re-issues and the debtor still fails to pay. In fact this may be worse for the debtor as he may risk additional, or 'corrected', adverse data appearing on his credit file. It is therefore a risk.

I would suggest that a counterclaim involves DPA and/or s.140. In my opinion, a defence based solely on a duff DN should be a last resort.

LA

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

I would just say that s.98 only applies to rolling credit after 2011 (Feb I think), before then there was no requirement to give notice, AFAIK. For that reason it's important to study the agreement itself. My understanding is that a creditor who wanted to terminate as per a contractual provision rather than default would restrict credit, scoop up the contractual interest, and let the agreement finally come to an end when the balance is zero.

In my view there is mileage to be had here - the Brandon judgement refers to the absence of exclusivity between default and contractual termination, so if a termination notice is issued then the agreement has been ended. However, if the DN is defective, then the termination cannot be a default termination (the creditor has no entitlement) it must be a contractual termination. So, if the OC has recorded a default, and the notice of intent to file a default is contained within the defective DN, then it could be argued that the adverse data was wrongly recorded and this might open up a claim under s.13 DPA. In other words, the OC was wrong to record a default because the termination was contractual, not through default.

The judge in Harrison said he saw no reason why a defective DN could not be fixed. There was a case OTR (last year or early this, I think Pumpkinhead's case) where the debtor claimed repudiation following a duff DN and the judge agreed, stating that the agreement was ended and so the debtor had to pay the balance to the OC. The point being that just because an agreement is improperly binned it doesn't seem to remove the liabilities. In fact, there is nothing in the CCA that enables this to happen. I think this should be remembered where repudiation is used as a defence (or claim).

In addition, it might be that a creditor realises his mistake and then demands the intervening contractual interest (it has happened to me!) - at this point, the debtor can simply refer to the contractual termination and also s.140, by simply saying that a claim for contractual interest from a terminated agreement is unfair (to put it mildly).

Sorry to ramble on but hope helps anyway. I just think that a successful defence or claim must stick to the relevant acts (CCA and DPA) so that a district judge isn't coerced to move into difficult territory which may result in an appeal.

Having said that, in reality a creditor might just give up (as Teaboy points out). On the other hand, if a defence was made based on "unlawful rescission" then a judge might simply apply the concept of recission and require both parties to pay to each other what they have taken. This may or may not be a good thing. For "repudiation" I have no idea - does a defective DN amount to repudiation, especially when a termination clause exists in the contract? Personally I doubt it.

LA

Repudation in legal terms under contracts is where one party refuses to fulfill his obligations or duties owed to the other party - i.e they refuse to allow you 14 days to rectfiy a default notice by terminating (especially by selling the account) the agreement. As once sold they are no longer the owners of the account of have any rights or entitlements connected to the account and therefore can not issue a new DN. Neither can the new owner of the account as the agreement was terminated therefore no agreement exists for them to beable to issue a DN under.

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

I still do not see how repudiation applies where a pre-2011 contract contains a termination clause. Where has the creditor repudiated the contract? All he's done has been to cock up the default termination. If there is a contractual termination clause then the agreement is probably ended, especially if there is a termination letter of some sort.

An account can be sold according to the contract. If it goes to a credit licenseee then there is nothing to stop a new DN being issued. However, if the assignee doesn't have a credit licence, then that is a bit of a problem as a new DN could never be remedied as the assignee would have no entitlement to invoke s.89 (or serve a DN anyway!).

One problem here is that there is no (AFAIK) case law, where the repudiation argument has been used successfully. In fact I think that 'repudiation' itself is something of a red herring, with 'breach of contract' being the more usual term which might not apply under regulated agreements anyway due to s.170 (no sanction on breach).

I just think that there are better, less risky arguments available to recipients of duff DNs, and that a claim or defence based on 'repudiation' is probably not going to work, unless a DJ is happy to see his judgement appealed.

Just my view of course, and probably complete rowlocks...but very happy that this thread is active again as I think this is an important issue.

LA

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

Yes and of course giving 14 days is not a requirement of he contract in any case, it is a requirement of statute so could hardly be repudiation of contract.

D

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

No once the account is sold to a new party whether they have a credit license of not is irrelevant as the agreement that permits them to issue a DN would have already been terminated. The account and the Agreement are two seperate things. The account is the debt not the agreement par se. Therefore only the original creditor can issue a new DN. If its been sold, they would have to buy back the account and reinstate the agreement for which they will need the debtors consent to reinstate. A DCA simply can not reinstate an terminated agreement to an account they own, for which they were not an original party to said agreement as only named parties on the agreement can issued a DN or a new DN to remedy a faulty one. Plus the agreement must still be live for them to do so.

The reason there is no case law is simply because 99% of cases are heard in the small claims court and not at high court. If they lose in county court when using the Unlawful rescission or repudation argument, it could be due to other faults in their arguements, or simply down to the judge on the day (something that we hear and see quite often, where one won using the same arguments that another lost on), truth is, we are unlikely to no the true reason why the argument failed in county court, but then there maywell be cases in county court where it was successfully argued, which we don't know about.

As said early, the outcome is still the same should you win in court using unlawful rescission/repudation, as it would be if the contract was terminated under a termination clause. Where they would still only be able to claim amount that was due at the time of termination and not the full outstanding balance.

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

Edit - Below is response to DavyB's last post.

But the contract is regulated by the CCA which entitles the debtor to 14 days. Therefore the creditor is in breach of contract as a result of not complying with statute law when issuing a faulty DN. You simply can not fail to comply with statute law and not be in breach of contract regulated by that same statute law.

A similar arguement was made in regards to distance selling regulations and sales of goods contract where the buyer cancelled within the cancellation period. The DSR gives the seller 30 days to refund, during those 30 days he is not in breach of contract, but should he not issue a refund on or before the 30th day for date of cancellation notice, then he is in brech of the DSR which in turn puts him in breach of contract.

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

I think that if a debtor had successively avoided repaying the creditor through a claim of rescission on a fault DN it would be well reported, other lesser issues certainly have, even in the lower courts.

I remember reading a case on CAg where a poster used this argument. The judge had already acknowledged that the DN was incorrect and that the creditor could not enforce.
However the debtor pressed that not only was the agreement unenforceable but that she wished to accept the repudiation of contract and subsequent rescission .

The judge agreed and ordered that the agreement be rescinded, which resulted in an order being given that the debtor repay all monies due under the contract back to the creditor.

Shot herself in the foot so to speak. I think it may have been the "pumpkinhead" case mentioned earlier if anyone would like to look it up.

D

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

I think that if a debtor had successively avoided repaying the creditor through a claim of rescission on a fault DN it would be well reported, other lesser issues certainly have, even in the lower courts.

I remember reading a case on CAg where a poster used this argument. The judge had already acknowledged that the DN was incorrect and that the creditor could not enforce.
However the debtor pressed that not only was the agreement unenforceable but that she wished to accept the repudiation of contract and subsequent rescission .

The judge agreed and ordered that the agreement be rescinded, which resulted in an order being given that the debtor repay all monies due under the contract back to the creditor.

Shot herself in the foot so to speak. I think it may have been the "pumpkinhead" case mentioned earlier if anyone would like to look it up.

D

Yeah but thats why you should never accept rescission, as a golden rule, as doing so means you consent to it. So yeah she did shoot herself in the foot by stating she wished to accept rescission. Though claiming unlawful rescission/repudation is not acceptance of the rescission/repudation but merely enforcing that it was unlawful and the creditor is therefore not entitled to the full balance. Off course as she won on faulty DN, then she would have had no need to argue unlawful rescission and could have withdrawn any counter claim to such effect. So her mistake was the use of the word "Accept".

I think the reason why we have not seen a reported case of unlawful rescission being successful in the county court is because 1 - hardly anyone has tried, and those that have, as per your example, clearly have not thought it out probably and gone the wrong way about it, as you clearly demostrated in your example above lol.

[Guest]

Re: Contracts, Termination, Repudiation and Rescission

Yeah but thats why you should never accept rescission, as a golden rule, as doing so means you consent to it. So yeah she did shoot herself in the foot by stating she wished to accept rescission. Though claiming unlawful rescission/repudation is not acceptance of the rescission/repudation but merely enforcing that it was unlawful and the creditor is therefore not entitled to the full balance. Off course as she won on faulty DN, then she would have had no need to argue unlawful rescission and could have withdrawn any counter claim to such effect. So her mistake was the use of the word "Accept".

I think the reason why we have not seen a reported case of unlawful rescission being successful in the county court is because 1 - hardly anyone has tried, and those that have, as per your example, clearly have not thought it out probably and gone the wrong way about it, as you clearly demostrated in your example above lol.

Personally i think it is because it does not make a any real legal sense, but that is only my opinion of course.

D

[Lord_Alcohol]

Re: Contracts, Termination, Repudiation and Rescission

The issue of a credit licence is relevant because, if the assignee has a credit licence and there is no contractual termination, then a court may very well say that the DN can be reissued. I cannot see any restriction in CCA that prevents this from happening. Don't forget that a judge will just be intrepreting and applying the Act, nothing more. A judge will ask a debtor why he thinks an agreement is repudiated, and if the reason if a defective DN I can imagine how that will play out...

It is incorrect to say that only the original creditor can issue a DN where there is right of assignment in the contract.

I also think it is a mistake to place complex legal arguments without precedent in front of a DJ, unless the debtor is prepared for a lot of work and possibly cost. I would strongly suggest sticking to the two relevant acts and using them to your advantage.

If there is any case at all, small claims or not, where this argument has been used successfully then I would be very interested to see it.

For recission to be claimed the debtor would have to ask for it. You cannot use the recession argument without accepting repudiation otherwise it cannot take place. Recession only happens at the point prior to the contract. You would have to ask for the agreement to be rescinded, to attain recission, the cause being the creditor's repudiation.

I honestly see no practical benefit in this line of reasoning (in agreement with Davy), unless more has been paid in to the account than taken but there is still the problem of s.170...

[teaboy2]

Re: Contracts, Termination, Repudiation and Rescission

But its unlawful rescission your claiming, therefore your not saying you accept the rescission, but waht you are saying is the agreement was unlawfully rescinded/repudated by the creditor thereforer without your agreement. Also if the DCA could issue a DN, as in your view, due the agreement not being terminated. That would mean that if the DCA issued DN was valid and the debtor repaid the arrears, that the DCA would then have to treat the default as not having occured, leaving the DCA with no choice but to continue to provide the Debtor, under the agreement with a credit fascility.

Now i can not see a DCA being able to do that, can you! Thats why once the argeement after the issuing of a DN (Valid or Invalid) is sold it is terminated. All a DCA has bought is the rights and entitlements to the Debt owed, they have not bought the rights and entitlements to carrying on providing the debtor with a credit facility under the agreement like the original creditor did. I mean come on how many DCA's do you know actually provide a running credit facility for a credit card. Fixed term loans probably not so much an issue as your paying back monthly. But credit cards lol - I think theres more chance of me visiting alpha centuri then their is of a DCA in this day an age being able to facilitate the running of a credit card facility. Put it this way, would it not also be unlawful repudiation of contract by the DCA if they refuse to provide such facility if the debtor paid the arrears on the DCA issued DN? Yes it would be unlawful repudiation. meaning they would not be entitled to the rest of the outstanding balance. So a DCA would be shooting themselves in the foot if they issued a new DN and the Debtor then paid. In fact, thats not a bad idea, let the original creditor sell the account of the back of a faulty DN, get the DCA to issue a Valid one then pay the arrears. If they then refuse to treat your default as not having occured you have them by the balls for unlawful repudiation and don't have to pay them another penny.

So in a way if what you said were correct, it wouldn't make the slightest bit of difference as its pretty clear before a debtor pays the arrears that the DCA has no intention of doing anything but repudiate the contract. Something that could be argued in court too on grounds of the DCA had no intention of treating the breach as having not occured even by issuing a valid DN, as they simply do not have the ability to facilitate a running account agreement for a credit card, therefore they would have not been able to comply with their duties and obligations under the contract if the arrears under the default had been paid. As such all they are entitled to claim is arrears. Off course thats unless they can prove they could facilitate the operation and running of a running credit agreement allow the debtor to continue to use the credit card as though no default had occurred. But the chance of them being able to prove that is very highly unlikely!

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Not rescission as a cause, as that can only be by mutual consent. However, if any party repudiates, whether consciously or by fundamental breach, the other party is entitled to accept that act as an invitation to mutual rescission.



If an agreement reaches rescission, then no agreement exists, and as in my case, the OC is entitled to seek repayment of the original amount of the loan (but no interest as that was not handed across). The borrower then is also entitled to receive back all payments made whilst the agreement was in place, which included interest. However, as the injured party following the lender's fundamental breach, they may also claim damages, such as statutory interest. Thus if the agreement had reached any kind of maturity, the OC is likely to have to pay back more than they loaned out. They will then, if they havetaken this to court, also have to face the charges of breach, which could lead to further damages and finds.



For this reason, any serious case of unlawful repudiation will not make it to court as it is in the OC's interest to settle before such judgements are made. That is why so few cases of UR are on record.

[SeeThumb]

Re: Contracts, Termination, Repudiation and Rescission

Rescission is not repudiation. Rescission is a mutual act that may be accepted by the injured party following unlawful repudiation. The rescission is not unlawful.



Repudiation is the unilateral rejection of a contract that can be lawful, if done with due process, and must be done before action to recover funds. But if for some reason it is not done properly, it is unlawful, but is still binding, as the party must take responsibility for their recorded actions.



So, it is repudiation that allows rescission, and rescission that requires that the situation is returned to the pre agreement. If you are the injured party of unlawful repudiation, you have the advantage as mentioned above.