The law allows an innocent party to cancel a contract where the counter-party has wrongfully repudiated a contract, and then to claim damages.
In calculating the damages, however, events following repudiation must be taken into account where the events would have reduced the value of performance, even without a breach, had the contract continued in being.
This was confirmed by the English courts in Golden Victory and Bunge SA v Nidera BV.
If events after repudiation showed that a contract would not in fact have been performed or the value of the performance would have been reduced, this must be reflected in the awarded damages.
No damages will be awarded where the breach did not cause a loss.
This is also the position in South African law when calculating damages in the circumstances.
A party faced with an unjustified refusal to perform the contract has an election whether to accept the repudiation or not. It may reject repudiation and continue with any remaining performance obligations of its own. Sometimes a difficult decision has to be made, particularly where a party wrongly decides that a contract has been repudiated and decides not to continue with its own performance obligations, risking an action for breach of contract itself.
Consideration should also be given to whether on the facts a party can accept the breach as a repudiation of the whole contract.
This approach is in line with the principle that damages are intended to compensate the wronged party. So no damages will be awarded where the breach did not cause a loss.
Where a party was not in a position to perform its side of the bargain, for example because an embargo or sanctions made performance illegal, the innocent party would be left with no claim even if the other party had not wrongfully repudiated.