Societe Generale, London Branch v Geys [2012]

Société Générale, London Branch v Geys [2012] UKSC 63 is significant in the realm of UK labor law and company law, specifically addressing the theories of contractual repudiation—automatic and elective.

In this case, Raphael Geys's employment contract with Société Générale was terminated, and the issue revolved around whether the termination was automatic or elective. The Supreme Court, in its decision, affirmed the elective theory, which means that the contract would only end if the innocent party elected to accept the repudiation. The automatic theory, on the other hand, posits that the contract terminates automatically upon repudiation, without the need for the innocent party's acceptance.

The court held that Société Générale's wrongful repudiation did not automatically terminate Mr Geys's contract. The contract would only end if Geys chose to accept the repudiation. The court emphasised the potential injustice that the automatic theory might produce, as it could reward the party that wrongfully repudiated the contract on a termination date of its choosing. Additionally, the court highlighted the importance of providing clear notice to the employee regarding the termination, and in this case, Société Générale had not given clear notice to Geys about the payment.

The judgment considered the oscillation between the automatic and elective theories and acknowledged that the question of which theory should be adopted is an open one. The court, in this instance, leaned toward the elective theory, emphasising the importance of allowing the innocent party to judge whether it is in their interests to keep the contract alive.

The dissenting opinion by Lord Sumption argued for a general rule that an innocent party to a repudiated contract could not treat it as subsisting if his performance would require the other party's cooperation. Lord Sumption favoured the automatic theory over the elective theory.

This case highlights the ongoing debate and uncertainty surrounding the theories of termination in employment contracts and the need to carefully consider the potential injustice that may arise from adopting one theory over the other.
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