Welcome to Compact Contract, a blog where experts from Allen & Overy analyse the latest contract law themes and developments, and what they mean for your business.

Oh no, not another case on good faith and rationality

Jason Rix

In Cathay Pacific v Lufthansa, the High Court found that an option in an engine maintenance agreement: (1) was not subject to an implied duty to be exercised rationality, (2) even if it were, there was no breach, (3) nor was the agreement a “relational contract” subject to an implied duty to act in good Read More

Money down the drain? How to avoid damages being sunk by remoteness.

Richard Farnhill

The fact that your contract has been breached and the breach has caused you losses is not enough for you to make a recovery. Remoteness is the often overlooked third leg of the damages stool. In AG of the Virgin Islands v Central Water Associates the Privy Council gave more guidance on how the rules Read More

Still sanctioned: “in order to comply with any mandatory provision of law”

Jason Rix

The  Court of Appeal has confirmed that a provision in an English law facility agreement stating that the borrower would not be in default if “…sums were not paid in order to comply with any mandatory provision of law…” allowed the borrower to avoid making payments where to do so might breach U.S. federal law Read More

“Ipso facto” clauses will no longer bee the obvious route out

Emma Keeling

Yesterday, the Government’s Corporate Insolvency and Governance Bill, described by our restructuring team as the most significant insolvency reforms in the UK for a generation, passed through the House of Commons. For a full analysis see their bulletin here. In this post I will focus on so-called “ipso facto” clauses, ie clauses which allow termination Read More

Fine words butter no parsnips: remedying a material breach

Celine O'Donovan

In Bains v Arunvill, the Court of Appeal held that non-performance amounting to a material breach of contract could not be remedied by a promise to perform. Non-performance could only be remedied by commencing actual performance. Arunvill had hired Bains as a consultant, with the specific services to be provided largely left at Bains’ discretion. Read More

May the force majeure event be with you?

Joseph Worndl

In 2 Entertain v Sony, the High Court held that liability for losses stemming from a warehouse fire during the 2011 London Riots could not be excluded by a force majeure clause. Sony provided warehousing and distribution services to 2 Entertain, a BBC subsidiary selling DVDs. In 2011, during, the London riots, a gang set Read More

Can’t get no satisfaction? Think again!

Bianca Vasilache

In UK Acorn v Markel, the High Court implied a term that Markel should act rationally where something needed to be demonstrated to its “satisfaction”. UK Acorn, a bridging finance lender, obtained two judgments against a surveyor for negligent overvaluations. It sought to recover from Markel, the surveyor’s insurer. Markel tried to avoid paying by Read More

What does “prior to Completion” mean?

Jason Rix

In Gwynt Y Mor Ofto the court found that an indemnity in a sale and purchase agreement for loss “prior to Completion” meant the 6-day period between signing and completion. Accordingly, it did not cover corrosion in sub-sea cables dating back months or years. The defendants sold to the claimants the business of owning, maintaining and Read More

CATS out of the bag on unitary interpretation

Tessa Pullen

In Teesside Gas v CATS North Sea, the Court of Appeal  takes us step-by-step through the unitary exercise of contractual interpretation. This was a dispute about the amount payable by Teesside Gas to CATS for the right to use part of the capacity of a North Sea pipeline. Teesside Gas contracted with CATS to reserve Read More

A GBP 1m lesson in checking that your telephone offer has been accepted

Loraine MacDonald

In Moorgate Capital v Sun European, the High Court found that no contract arose from a telephone conversation between two directors because there was insufficient evidence of a consensus being reached or an intention to create legal relations. As a result, Moorgate lost out on a GBP 1m payment. A director from Moorgate (Mr Mockett) Read More