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Refusing To Perform May Repudiate The Contract – De Beers V. Atos Origin

DATE: 21.06.2011

 

In December 2010, the English High Court handed down judgment in a dispute between De Beers UK Limited (“De Beers”) and Atos Origin IT Services UK Limited (“Atos”) in relation to repudiatory breach of contract. While the decision does not change the laws of Ireland and is not binding on Irish courts it would likely be of persuasive effect before an Irish Court.

 

Background

Atos had been contracted to provide supply-chain management software to De Beers. The contract did not progress well and the court was highly critical of both parties’ conduct. De Beers failed to provide senior staff with sufficient time commitment to Atos and changed the scope of the project. In addition, De Beers refused to disclose the details of a confidential matter which delayed the project. Atos failed to appreciate the complexity of the project and did not appear to commit sufficient experienced staff to the project.

Ultimately, the parties engaged in correspondence, after De Beers withheld a milestone payment due to Atos’ unsatisfactory performance of the contract. In correspondence, Atos threatened to cease performance of the contract, unless the contract was renegotiated. On the day of the threatened deadline, De Beers removed security passes from the Atos staff. Both parties claimed the other had repudiated the contract.

Decision

Each party alleged the other party repudiated the contract.

The court found in favour of De Beers and held that Atos in showing an intention to refuse to perform the contract had repudiated the contract – as Atos was willing to complete the project, but not the contract as it was currently formulated. However, the conduct of De Beers, as mentioned above, significantly reduced the damages awarded to De Beers, who ultimately recovered £1.4 million from a claim of £8.68 million. This case highlights the importance of parties seeking to perform the obligations as originally set out in a contract until the contract is formally amended by the parties. The judgment also demonstrates that a party’s conduct, even when the court finds in favour of a party, will be taken into account by the courts when considering the amount of costs and damages to be awarded.

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