Geys v Société Générale, London Branch [2012] UKSC 63

Geys worked for Société Générale under an employment contract providing for notice and a payment-in-lieu mechanism. The bank told him in November 2007 that his employment ended immediately. He did not accept that repudiatory breach. Money was later paid into his account, but clear notification connecting it to the contractual termination mechanism followed only in January 2008. The timing affected the amount payable under his termination arrangements. The Supreme Court had to decide whether the first wrongful dismissal automatically ended the contract or whether later effective contractual termination controlled.

When did the employment contract terminate: on the bank’s repudiatory dismissal, or only after acceptance of breach or validly communicated contractual termination?

The Supreme Court applied the elective approach to repudiatory breach. The bank's purported immediate dismissal did not automatically terminate the employment contract when Geys had not accepted the repudiation. The bank could instead bring it to an end through a valid exercise of the contractual payment-in-lieu provision.

That mechanism required clear communication identifying the payment as the exercise of the contractual termination right. Merely transferring money without adequately telling the employee what the bank was doing did not suffice. Effective notification occurred in January 2008, with consequences for the contractual termination benefits. The case concerns termination and accrued entitlements, not enforcement of a guarantee. The wrongful party could not make its breach automatically end the contract on the date most advantageous to it.

Repudiatory breach does not ordinarily terminate a contract automatically: the innocent party may elect whether to accept it. A contractual right to terminate by payment in lieu must be exercised according to its terms and clearly communicated. Breach, payment and effective termination may occur on different dates.

Geys is important for the difference between repudiation and termination, illustrated by the financial significance of the effective date. It also shows why contractual machinery matters independently of common law acceptance of breach. The employee did not have to treat the bank's wrongful attempt as an immediate end to the relationship. An exam answer should distinguish the date of the breach, any election, the payment and clear notification, rather than selecting whichever date a party used in its first letter.