• The case of Greys v Societe Generale (2012 UKSC 63) involved a dispute between the appellant, Greys, and the respondent, Societe Generale, over the enforcement of a guarantee. The UK Supreme Court ruled that the guarantee was enforceable, highlighting the importance of clear and unambiguous language in contract interpretation.

Facts of the Case

  • Mr. Greys, the claimant (C), was employed by a bank, Societe Generale (the Bank), the defendant (D). Under Mr. Greys’ contract, he was entitled to receive three months’ written notice of termination, in the event that his contract was to be terminated by the bank.
  • In addition to the latter terms, the Bank reserved the right to terminate Mr. Greys’ employment at any time with immediate effect by making a payment to the claimant in lieu of notice.
  • On the 29 of  November 2007, The defendant, Societe Generale, held a meeting with the claimant, Mr. Greys, where they told him his employment was being terminated immediately. This being said, Mr. Grey did not receive any payments in lieu of notice until the 18 of December 2007 and then was only informed in writing by the Bank confirming the payment in lieu of the 4th of January 2008.
  • It was in Mr. Greys’ best interest to claim that the contract was terminated in 2008 rather than 2007 because it would entitle him to a higher severance payment.

Issues in Greys v Societe Generale 2012 UKSC 63

  • The Supreme Court was asked to primarily consider, the date on which Mr. Greys’ contract of employment was terminated. In doing so this would determine whether the automatic theory or the elective theory of termination is correct
  • The automatic theory states that a contract is terminated automatically upon a repudiatory breach, this doctrine would favour the defendants as the contract would then, be declared, terminated on the 29th of November 2007.
  • The elective theory states that a contract is terminated only once the innocent party accepts the repudiation to effect a termination and the party seeking to terminate an employment contract is required to notify the other party that it is doing so in clear and unambiguous terms.
  • Mr. Grey claimed that a severance payment was due to him under the contract based on a termination date recorded as the 4th of January 2008, when Mr. Grey is said to have received the Banks notice of payment in lieu of notice under the contract; and damages for breach of contract.

Held by Supreme Court

  • Mr. Greys succeeded in his claim and was entitled to the higher severance payment as the contract was officially declared to be terminated on the 6th of January 2008, when the claimant was deemed to be notified.
  • Although a repudiatory breach of contract occurred on the 29th of November 2007, by the defendant, the contract had not been automatically terminated on that date because C had not accepted the repudiation.
  • Nominal damages for the breach of contract by D was awarded to C since he would’ve obtained a lesser severance payment had the termination been effectively made on the 29th of November 2007 without breach of contract

Lord Hope

  • Lord Hope suggested that the automatic theory may result in injustice, additionally, he made clear that the party who is in the wrong should not be permitted to benefit from his own wrong.
  • Manifest justice favours preferring the interests of the innocent party to those of the wrongdoer. If there exists a good reason and an opportunity for the innocent party to affirm the contract, he should be allowed to do so.