Even if you are on the receiving end of a breach of contract and breach of trust you must be careful before considering the contract at a end. If you get it wrong – you could be the one found in breach!
Fiduciary Duties
A relationship where the law recognises that a party owes fiduciary duties to others signifies that the relationship is one of important and inherent importance of trust and confidence. For example, company directors have fiduciary duties and generally speaking, an agent may owe fiduciary duties to a principle.If a breach is particularly serious, so as to be fundamental, it may be classed as a repudiatory breach. The innocent party in such a circumstance can treat the contract as at an end and claim damages. However, if the breach is not significantly serious enough to be classed as repudiatory you (the innocent party) may not be entitled to bring the contract to an end.
Consequently, as matter of contract law, where there is a fiduciary duty (in its most basic form this is a position of trust given by another in the management of property or money) and that has been breached, it would seem logical that the breach would be classified as a serious breach based on the relationship itself. Could it possibly be a breach which is repudiatory (that is to say a breach serious enough for the innocent party to treat the contract as at an end), for example? Not necessarily – the key is still to look at the breach itself and its consequences, as a recently reported Court of Appeal case confirms.
In the case in point, an agent posted critical comments about the level of service provided by the Principal on its website, essentially stating that the Principal was very poor in dealing with customer orders. This was clearly a breach of contract, but the Court decided that it was not a sufficiently serious breach to amount to an intention to repudiate the contract.
Agency relationship
The decision is also important given it concerned an agency relationship and one that was governed by the Commercial Agency Regulations. These provide that where a Principal terminates an agency relationship, the agent will be entitled to compensation which can be a significant sum of money. That right to compensation will be lost where the Principal can legitimately terminate the contract. Had the breach in the above case been held to be repudiatory, the Principal would have avoided having to pay compensation, so the decision by the Court of appeal is significant in this respect.
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