WH In-House Contract Law Update Wednesday 21 st March 2018 Newcastle - - PowerPoint PPT Presentation

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WH In-House Contract Law Update

Wednesday 21st March 2018

Newcastle | Leeds | Manchester

HOUSEKEEPING

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Recent Developments in Contract

Professor Ewan McKendrick University of Oxford

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ESSENTIAL TERMS » Trigger event an essential contract term » No implication of terms into incomplete contract » Not enough that parties intended to be bound » Distinction between agreeing to use best efforts or best endeavours to achieve a particular result and agreeing to use best endeavours to reach agreement on an essential term. » Delivery date also an essential term and no implication to make it sufficiently certain

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REASONABLE ENDEAVOURS AND GOOD FAITH » undertakes to use all reasonable endeavours to obtain the Senior Debt Facility. » enforceable if the object of the endeavours is sufficiently certain and there are sufficient objective criteria by which to evaluate the reasonableness of the endeavours. » Agreement with third parties » Still entitled to take account of own interests » Good faith a lesser obligation

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AGREEMENT TO RE-NEGOTIATE LICENCE » It is hereby agreed between the parties that in the event of any major physical or financial change in circumstances… either party may serve notice on the other requiring the terms of this Licence to be re-negotiated with effect from the date on which such notice shall be served. » If agreement not reached, reference to arbitration » distinction between those cases where the issue is whether a contract has been agreed at all between the parties and the case where the issue is whether a particular clause in an otherwise binding agreement is valid

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INTERPRETATION I » Some agreements may be successfully interpreted principally by textual analysis (because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals) » The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix (informal contracts) » Negotiators of complex formal contracts may not achieve a logical and coherent text intended or contemplated by the parties » Where provisions in a detailed professionally drawn contract lack clarity the factual matrix and the purpose of similar provisions in contracts of the same type may be helpful.

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» Woods v Capita Insurance Services Ltd » No inconsistency between Rainy Sky and Arnold v Britton » Not relevant or of little relevance – commas, pre-contractual negotiations and business common sense. » Contractual context significant. » Relationship between the indemnity clause and the range of two year warranties INTERPRETATION II

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» General principles often agreed » background knowledge reasonably available to the person or the class of persons to whom the document is addressed » No judicial re-writing of contracts » But no over-literal approach INTERPRETATION III

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INTERPRETATION IV » Limited significance of contra proferentem rule » only in exceptional cases can commercial common sense drive the court to depart from the natural meaning of contractual provisions. » Recitals and substantive terms » Subsequent conduct

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IMPLIED TERMS » Test is necessity rather than reasonableness » Necessity must not be watered down » Improvements, fairness or equity not enough » No re-writing of the contract » No inconsistency with an express term of the contract » Linguistic inconsistency and substantive inconsistency

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CONTRACTUAL DISCRETION » What is a contractual discretion? » Discretion to be exercised in a way that was not arbitrary, capricious or irrational in the public law sense » A term implied in law or a term implied in fact? » Contracting out?

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TERMINATION I » Repudiatory breach does not of itself terminate a contract » Need for acceptance » Acceptance must be clear and unequivocal » Failure to nominate a vessel not sufficiently clear » Be careful with correspondence

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TERMINATION II » Breach of a condition – terminate and loss of bargain damages » Breach of an innominate term – consequences of breach must be sufficiently serious » Past breach and likelihood of breach in the future » Renunciation

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TERMINATION III » Scope of an express right to terminate » A question of interpretation » Relationship between express right to terminate and rights arising under the general law » Problems which arise from termination notice where reliance placed on an event which is not a breach of contract » Distinction between no waiver of rights and the exercise of rights

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ECONOMIC DURESS » Illegitimate pressure – may consist of lawful conduct in exceptional circumstances » Pressure must be a significant cause inducing the claimant to enter into the contract » Practical effect of the pressure must be that there is compulsion on, or a lack of practical choice for, the victim

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DAMAGES » Vessel sold for $US23 million – worth $US7 million when contract would have come to an end but for acceptance of repudiatory breach » No causal link between benefit sought to be brought into account and breach » Nor was the sale an act of mitigation » Loss or gain? » Damages assessed by reference to price of release » Jurisdiction not confined to cases where cannot prove identifiable loss

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PENALTY CLAUSES » Question of interpretation » Real issue is whether clause is penal » Secondary and primary obligations » Question of substance, not form » Detriment out of all proportion » Legitimate interest » Onus of proof » Reluctance to intervene at least in case where parties are of roughly equal bargaining power

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EXCLUSION CLAUSES I » Application of the ordinary rules of interpretation? » Limitation clauses appear to be construed more benevolently than exclusion clauses » The declining significance of the contra proferentem rule » The declining significance of the Canada Steamship rules – will they be confined to indemnity clauses in the future?

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EXCLUSION CLAUSES II » The impact of UCTA 1977 » The role of exclusion and limitation clauses in risk allocation » The meaning of indirect and consequential loss » Typically Hadley v Baxendale limb 2 » But not an inevitable conclusion » When will the courts interpret it in a causal sense?

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EXCLUSION CLAUSES III » UCTA section 3:this section applies as between contracting parties where

• ne of them deals on the other’s written standard terms of business

» Reasonableness of the clause » Do not attempt to exclude liability for death or personal injury caused by negligence » Equality of bargaining power » Reasonable steps to explain and draw attention to clause » Availability of insurance

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ANY QUESTIONS? Ewan McKendrick Oxford University & Professor of English Private Law E: ewan.mckendrick@admin.ox.ac.uk

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Thanks for joining us

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