07 October 2016 - Post by:Richard Farnhill
The new court term started this week; in the realm of contract, it has quite an act to follow. The period before the long vacation saw real shifts in the way that contracts operate and what happens when they fail to operate. For example:
- The Court of Appeal has confirmed that “no variation” clauses do not really work, at least in their typical form (Globe Motors Inc v TRW Lucas Varity Electric Steering Ltd; MWB Business Exchange Centres Ltd v Rock Advertising Ltd).
- Rock also raised the question of what needs to be shown to establish consideration, previously a significant issue in the variation of contracts, but to which the answer now appears to be, “Not a great deal.”
- The Court of Appeal has also looked again at what happens in the case of a repudiatory breach and, specifically, whether the non-breaching party can always insist that the contract is performed. In short, it cannot – sometimes it will be obliged to accept the repudiation, terminate and move on. (MSC Mediterranean Shipping Company SA v Cottonex Anstalt).
- The Supreme Court has taken a focussed line on the effect of dishonesty and illegality on contracts. The effect is that neither is as absolute a bar to recovery (whether under the contract or in restitution) as it once may have seemed. (Mirza v Patel; Versloot Dredging BV v HDI Gerling Industrie Versicherung AG).
- The Supreme Court has also found that agents are not so secure in their positions as they thought; the principal can terminate the agency, even though it may weaken the agent’s ability to recover sums due to it. (Bailey v Angove’s PTY Ltd).
- The new term promises more of the same. The Court of Appeal decisions may yet end up before the Supreme Court (we are watching that space). All these decisions are starting to be applied to new facts by the courts. Add to the mix Brexit, and the issues it will start to throw up, and contract is an area well worth keeping an eye on.