Breach of Contract – Will a Long Notice Period Affirm the Contract?

In the case of Brown & Anor v Neon Management Ltd & Anor, the High Court held that where an employee resigns but on notice of six months or more, this will affirm (i.e. deemed to have consented to the breach) the contract of employment unless there are further breaches of contract after the resignation.

If an employer commits a repudiatory breach of contract, an employee can either decide to end the contract (by resigning) or affirm it. However, if an employee waits too long to resign in response to the breach, they run the risk of affirming the contract.  As this case shows, the same can be said by working a lengthy notice period.

In this case, the Claimants issued claims for wrongful dismissal and breach of contract. The Claimants alleged that the Defendant had breached their contracts of employment due to various failings, which individually and cumulatively amounted to a repudiatory breach of contract entitling them to resign. The Claimants decided to resign on notice (ranging from six months to twelve months).

Whilst serving their notice periods, the Claimants contended that the Defendant committed further repudiatory breaches of contract. The Claimants resigned with immediate effect as a result.

The Defendant argued that by resigning on notice on 16 March 2018, the Claimants had affirmed the alleged repudiations to that date and had therefore kept their contracts alive.

The High Court ruled in the Claimants’ favour.

The High Court stated that if there had been no further breaches of contract after the on notice resignations, then the Claimants would have affirmed their contracts because their notice periods were six months or more. However, as there were further repudiatory breaches of contract and the Claimants had resigned promptly in response, the contracts had not been affirmed.

This case highlights the importance of prompt action following a repudiatory breach of contract and the need to strongly consider whether resignation should be on notice.  A notice period of six months or more will effectively keep the employment contract alive in the absence of any further breaches.

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