Contractual Cure Notices Must Identify the Material Obligation Breached and Strictly Comply Where Termination Consequences Are Drastic

Introduction

The case concerns the attempted early termination of a long-term waste-management agreement between William Campbell Recycling Limited, the pursuer, and the Scottish Society for the Prevention of Cruelty to Animals, the defender.

The 2021 agreement covered waste services at sites throughout Scotland. In the absence of breach, it could not be terminated on notice before 31 December 2038. Clause 6.3 nevertheless permitted immediate termination where a party was in default of a material obligation and failed to remedy the breach within 30 days of a request.

Following a deterioration in relations, the defender requested health, safety and environmental information for each site. Its solicitors sent an “ULTIMATUM LETTER” on 14 February 2024, asserting that the pursuer was subject to an implied obligation to perform the services without placing the defender in breach of the law. The letter demanded completed questionnaires within 30 days. On 21 March 2024, the defender purported to terminate the agreement on the basis that no timely response had been received.

The pursuer maintained that the termination was ineffective and itself amounted to repudiatory breach. It sought decree de plano declaring that the defender had not terminated the contract validly and that the pursuer had subsequently accepted the defender’s repudiation. The defender argued that disputed questions about implied terms, breach and mutuality required evidence at a proof before answer.

Summary of the Judgment

• A request under Clause 6.3 had to identify the material contractual obligation said to have been breached.
• Because termination could bring a contract lasting until at least 2038 to an immediate end, strict compliance with the notice requirements was appropriate.
• The ultimatum letter identified a purported obligation not to perform the services in a manner placing the defender in breach of its statutory duties.
• The defender had relevantly averred that this obligation might arise as an implied term. It could not be said, without evidence, that the argument was bound to fail.
• A separate alleged duty to co-operate might also be implied, but it had not been identified in the ultimatum letter. The letter was therefore ineffective as a Clause 6.3 notice in relation to that distinct obligation.
• The defender’s averments that the pursuer was already in material breach could, through the doctrine of mutuality, affect the pursuer’s entitlement to terminate. Those averments were not relevant merely to damages.
• The motion for decree de plano was refused. Further procedure was to be determined at a By Order hearing.

The court therefore did not finally determine whether the contract had been validly terminated. It held that material factual and legal issues remained suitable for proof.

Analysis

1. The requirement to identify the breached obligation

Lord Lake distinguished three separate questions:

1. What does the contract require a notice to contain?
2. Did the notice comply with those requirements?
3. If it did not comply strictly, can it nevertheless take effect?

This distinction was central. Clause 6.3 permitted a party to make a “request” that a breach of a material obligation be remedied. Because the request must be directed to remedying a particular breach, the breach—and therefore the obligation breached—must be identified.

The court did not treat this as the implication of an additional contractual term. It was an exercise in establishing the meaning and content of Clause 6.3 itself. The reasoning reflects the fourth category discussed by Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239: determining what the contract, properly construed, requires.

The decision does not establish that every contractual notice must always cite the precise clause allegedly breached. The requirement arose from the language and purpose of this particular cure provision. Nevertheless, it provides important guidance for similarly worded clauses.

2. Strict compliance and the severity of termination

The court accepted that the stricter the consequences of a notice, the greater the need for compliance with the contractual requirements. Here, the notice could create a right to terminate immediately an agreement otherwise protected from ordinary termination until at least 2038. Its consequences were therefore “drastic”.

The notice identified the asserted obligation not to place the defender in breach of statutory health and safety duties. It did not, however, identify the separate implied duty to co-operate later advanced in the pleadings. Applying a strict approach, the defender could not use the notice as a cure request in respect of that separate obligation.

Commercial context remained relevant. The notice had to be read against the parties’ preceding correspondence. Context may explain the contractual basis and practical demand conveyed by a notice, but it cannot necessarily substitute for identification of a distinct obligation where the clause requires that obligation to be specified.

3. Implied obligation concerning legal compliance

The pursuer argued that the obligation asserted in the ultimatum letter did not exist. Lord Lake expressed doubt that every services contract contains a general implied term that the supplier will not place its customer in breach of the law. The defender’s case was nevertheless fact-specific: the services were performed at its premises, involved large vehicles and allegedly required information necessary for statutory health and safety compliance.

On those averments, it was possible that performance without the requested information would deprive the agreement of commercial or practical coherence. The alleged term was therefore capable of satisfying the business-necessity test for implication. Whether it actually existed depended on proof of the circumstances surrounding the contract and its performance.

The same conclusion applied to the alleged duty to co-operate. Its existence was sufficiently arguable to survive a relevancy challenge, even though it had not been properly identified in the Clause 6.3 letter.

4. Mutuality of contractual obligations

The defender also contended that the pursuer was itself in material breach when it sought to treat the defender’s termination as repudiatory. Under the Scots law doctrine of mutuality, a party materially failing to perform its own obligations may be unable to insist on corresponding performance or exercise certain remedies against the other party.

The pursuer argued that any pre-existing breach would affect damages only and could not prevent it from accepting the defender’s repudiation. The court rejected that position at the relevancy stage. If the defender proved the alleged terms, their materiality and their breach, the pursuer’s entitlement to terminate might itself be affected.

This was an additional reason why declarator could not be granted without evidence. The court did not finally decide that mutuality barred the pursuer’s claim; it held only that the defence was legally relevant and fact-sensitive.

Precedents Cited

Implication of terms

Marks & Spencer plc v BNP Paribas Securities Services [2015] UKSC 72, [2016] AC 742 was the principal modern authority. The pursuer relied on it to argue that a term cannot be implied merely because it appears reasonable.

The judgment also considered the formulation in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266. Lord Lake emphasised, however, the Supreme Court’s statement that business necessity and obviousness are alternative routes to implication and that necessity is not confined to “absolute necessity”. A term may be implied where, without it, the agreement would lack commercial or practical coherence.

The established line of authorities—The Moorcock (1889) 14 PD 64, Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592, Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, Equitable Life Assurance Society v Hyman [2002] 1 AC 408 and Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988—formed the doctrinal background to that conclusion.

Contractual notices

In Lombard North Central Plc v European Skyjets Ltd [2020] EWHC 679 (QB), it was argued that a notice materially increasing the recipient’s burden must state the primary facts relied upon with sufficient specificity. Lord Lake treated that decision cautiously because it arose from an application to set aside an earlier judgment and was fact-dependent. It did not establish a universal rule that every notice must specify the underlying obligation.

QOGT Inc v International Oil & Gas Technology Limited [2014] EWHC 1628 (Comm), adopted in Scotland by Oil States Industries (UK) Limited v Lagan Building Contractors Limited [2018] CSOH 22, explained that a notice must allow a reasonable recipient to understand the contractual basis of the notice, assess its validity and take available remedial steps. That reasoning supported a practical, recipient-focused assessment.

Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 and HOE International Ltd v Andersen 2017 SC 313 concerned whether notices that did not strictly comply with contractual requirements could nevertheless be effective. They also established that notices are construed according to ordinary principles of commercial interpretation and in their relevant factual context.

HOE International Ltd v Andersen 2017 SC 313 further supported the proposition that more serious consequences justify greater insistence on compliance. Obrascon Huarte Lain SA v HM Att Gen for Gibraltar [2014] BLR 484 reinforced the remedial purpose of a notice: the recipient must have a genuine opportunity to put the failure right.

Mutuality

The defender relied on Graham & Co v United Turkey Red Co 1922 SC 533, Forster v Ferguson & Forster, Macfie & Alexander 2010 SLT 867, C&S Associates UK Limited v Enterprise Insurance Company Plc [2015] EWHC 3757 (Comm) and Dalton Group Ltd v City of Edinburgh Council 2023 SLT 237.

Lord Lake placed particular weight on paragraph 15 of Forster v Ferguson & Forster, Macfie & Alexander 2010 SLT 867. It supported the conclusion that a party’s own material breach may affect not only damages but also its entitlement to terminate or insist on contractual remedies.

Complex Concepts Simplified

Implied term

A contractual obligation that is not written expressly but may be treated as part of the contract because it is obvious or necessary to make the agreement work coherently.

Cure notice

A notice identifying a breach and giving the defaulting party a specified period in which to correct it before termination or another remedy becomes available.

Repudiatory breach

A sufficiently serious breach showing that a party will not perform the contract as required. The innocent party may accept the breach, terminate and seek damages.

Mutuality

The principle that corresponding contractual obligations are interdependent. A party materially in default may be unable to demand performance or exercise certain remedies against the other party.

Decree de plano

A judgment granted without proof because, even taking the opposing party’s factual averments at their highest, they disclose no legally relevant defence.

Proof before answer

A hearing of evidence where questions of legal relevancy are reserved until the facts have been established.

Impact

The judgment has practical significance for commercial contracts containing cure-and-termination machinery:

• Notices should identify each material obligation relied upon, whether express or implied.
• The required remedial action, contractual basis and consequences of non-compliance should be stated clearly.
• A party should not assume that correspondence or commercial context will cure the omission of a separate ground of breach.
• Where termination has severe or long-term consequences, courts are likely to insist on closer compliance.
• Pre-existing breaches by the party challenging termination may affect its substantive entitlement to terminate, not merely the amount of damages.
• Implied terms remain fact-sensitive and may require proof where the pleaded circumstances could establish commercial or practical necessity.

As an Outer House decision delivered at an interim stage, the ruling does not finally establish that the defender’s notice was valid or that the alleged implied terms existed. Its broader value lies in its structured separation of contractual notice requirements, compliance with those requirements and the possible validation of defective notices.

Other Procedural Matters

The defender criticised the lack of detail in the pursuer’s damages pleadings. Lord Lake considered the averments brief but held that, in a Chapter 47 commercial action, such concerns should ordinarily be addressed through case-management orders rather than immediate dismissal.

The court also recorded the pursuer’s confirmation that it did not contend that the notice was invalid merely because it had been sent to its solicitors.

Conclusion

William Campbell Recycling LTD against Scottish Society for the Prevention of Cruelty to Animals [2026] CSOH 90 establishes that, where a cure clause requires a request to remedy the breach of a material obligation, the notice must identify the obligation relied upon. Strict compliance is particularly important where non-compliance permits the immediate termination of a valuable long-term contract.

The decision also confirms that an arguable implied term should not be rejected without proof where the alleged facts could show that it is necessary for commercial or practical coherence. Finally, a claimant’s own material breach may, through mutuality, affect its entitlement to terminate and obtain declarator. Those unresolved factual questions required the action to proceed beyond the pleadings stage.