Gopal Sri Ram JCA:

[1] This appeal raises a short question. It is this. What are the remedies open to an innocent party where there is a breach of contract? One would have thought that this rather basic question had been answered by the courts of England at least by the mid 19th Century through the doctrine of repudiation. See, Philpot v. Evans [1839] 151 ER 200, 202; Ripley v. M'Clure [1849] 154 ER 1245, 1251. Where a promisor wrongfully repudiates a contract in its entirety, the promisee has a choice. He or she may elect to accept the repudiation, treat the contract as at an end and sue for damages. The rationale is that the primary obligation to perform the promise made is substituted with a secondary obligation to compensate the promisee for the breach. See, Moschi v. Lep Air Services Ltd [1973] AC 331. Alternatively, he or she may elect to reject the repudiation and treat the contract as subsisting. Whether the one or the other course was adopted by the promisee - the innocent party - is a fact that is to be inferred by the court from the objective facts, including the words and conduct of the parties. An election once made is irreversible. See, Sargent v. ASL Developments Ltd [1974] 131 CLR 634, 655. But it is the essence of the doctrine of repudiation that the breach must go to the root of the contract. See, Mayson v. Clouet & Anor [1924] AC 980; Bowes v. Chaleyer [1923] 32 CLR 159; Hongkong Fir Shipping Co Ltd v. Kawasaki Kisen Kaisha [1962] 2 QB 26.

[2] Now, there is another way of putting across the doctrine of repudiation. If a promisor does not perform his promise, the promisee may terminate the contract. This right of termination was referred to by the common law lawyers of the 19th Century as a right to rescind. Some lawyers continue to use the word rescind in this sense. Professor G.H Treitel is one. See, Trietel's "Law of Contract", (11th edn). But this "rescission" is very different from the specific relief of rescission invented by the Court of Chancery. The right to terminate puts an end to the contract only as to the future. All past rights and duties under the contract remain unaffected. But that is not. So in the case of the equitable remedy of rescission, which, when exercised, restores the parties to the same position as though the contract was never made. In other words, there is restitutio in integrum. Where it is impossible to restore the staus quo ante, the court may grant equitable compensation. This is what happened in Longstaff v. Birtles [2001] EWCA (Civ) 1219, a case involving the breach of fiduciary duty.

[3] But, the common law right to "rescind" and the equitable remedy of rescission should never be equated. Mark, that one is a right that may or may not be exercised whist the other is a remedy available in a Court of Equity, and, in our jurisdiction, given statutory force by sections 34 to 37 of the Specific Relief Act 1950. No doubt, there is a very limited right of rescission at common law (Lim Ah Moi v. AMS Periasamy Suppiah Pillay [1997] 3 CLJ 629) which, on closer examination is actually the quasi-contractual remedy of restitution in cases where there has been a total failure of consideration. See, Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32. A simple example serves to illustrate the common law right to rescind. If I pay you to sell me a ton of wheat and you deliver a ton of maize, I am entitled to return the maize to you and to have the price refunded.

[4] That there must be a total failure of consideration before the limited common law right to rescind may be exercised is borne out by the following passage at p. 502, para. 20-007 in "The Law of Restitution" (6th edn) by Goff & Jones which is the leading text on the subject:

A breach of contract may be so fundamental that it deprives the 'party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract tha