Hammer & Barrow v Coca Cola  NZLR 723
In this case, the Coca Cola company in New Zealand, placed an order with Hammer & Barrow for the manufacture of 200,000 Coca Cola yoyos. The first batch of yoyos produced, numbered somewhere in the order of 85,000. Of these, no less that 80 percent were defective, and were returned by the Coca Cola company on that basis.
Now, let’s stop and think about this from Coca Cola’s perspective. Everyone is entitled to the occasional bad item in a batch of thousands. However when 80 percent of the batch are defective, you must start to wonder whether the manufacturer is competent to complete the contract. And at this stage, there were still another 115,000 yoyos to be manufactured! What were Coca Cola to do? Hold on and hope for the best? Rely on damages? In the end, they did the only thing they sensibly could do: they treated the contract as having been terminated for repudiation, on the basis that the inability of Hammer & Barrow to complete the contract could be inferred from the disastrous first batch.
Inferring repudiation is, however, extremely tricky. In the Coca Cola situation, it was pretty clear that the failure rate was unacceptable. However what if the failure rate had been 20 percent? 10 percent? At what level does the failure rate become so high that Coca Cola was able to infer repudiation? These will be questions of fact for the court to look at; so a party must really be very clear about the basis of their view that the other party’s repudiation can be implied.